Air France-KLM misses profit forecast on higher costs
Q2 operating profit 513 mln euros vs forecast 547 mln
Sees unit costs up 2% in 2024 vs up 1-2% previously
Group cutting discretionary costs, marketing spend
Updates share move, adds CFO comments in paragraphs 6 and 12-13
By Stephanie Hamel
July 25 (Reuters) -Airline group Air France-KLM AIRF.PA reported a worse-than-expected 30% drop in quarterly operating profit on Thursday, as higher labour and fuel costs erode margins even as revenues are boosted by higher fares.
Second-quarter operating profit fell to 513 million euros ($557 million), below the 547 million euros expected in a company-provided consensus of analyst forecasts.
"The miss ... is driven by 3% higher fuel costs & 2% higher D&A" (depreciation and amortization)" said a Deutsche Bank note.
Air France-KLM shares were up 1.8% at 1245 GMT, after opening slightly lower.
Several airlines, including Ryanair RYA.I, have missed earnings forecasts recently amid rising costs and signs the post-pandemic boom in travel is fading, although easyJet EZJ.L painted a brighter picture on Wednesday.
"Air France actually has all the headwinds this quarter", chief financial officer Steven Zaad told a press call, citing a 40 million euros ($43 million) revenue hit from the Olympic Games in Paris, which open on Friday, as well as higher costs from salaries linked to labour agreements.
The group said it expected unit costs - the average cost of flying an aircraft seat one mile - to rise 2% in 2024 from the year before, against 1-2% estimated previously.
It trimmed its annual capacity forecast to a 4% rise, from 5% previously.
Air France-KLM said it had taken measures to cut costs since April, including a hiring freeze for support staff.
Cuts in marketing expenses and a 20% reduction of discretionary costs should be implemented in the rest of this year, it said.
Quarterly revenue rose 4.3% to 7.95 billion euros, as expected, through the group issued a profit warning earlier this month as the Olympic Games spurred some people to rethink their travel plans.
"The Olympics is just once in a lifetime in your home country. I know it is a disappointment in terms of revenues, but I would like to invite everybody to see the beauty of Paris," said Zaad.
He expected a positive trend in French demand after the Games.
($1 = 0.9217 euros)
Reporting by Stéphanie Hamel; Editing by Bernadette Baum and Mark Potter
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