Air France-KLM will deepen an overhaul of its Dutch subsidiary KLM as the carrier group grapples with higher fuel expenses and a cost of living crisis deterring passengers. KLM will reorganize operations and simplify its European fleet, phasing out older aircraft to balance larger versus smaller and newer planes. The measures aim to help KLM meet a long-term margin target of more than 8%.
Soaring jet fuel prices, driven by the Middle East war, accelerated the need to review KLM's business model. The carrier group reported third-quarter adjusted operating income of €1.35 billion ($1.5 billion), up from €1.22 billion, helped by resilient North Atlantic demand and stable costs excluding fuel. Cargo revenue jumped due to a shift to air freight from sea freight amid Suez Canal and Strait of Hormuz disruption.
Air France-KLM trimmed its full-year capacity outlook to 2% from a previous 3% forecast. Based on current hedging, the group now estimates its 2026 total fuel bill at $9.2 billion, up from $8.9 billion, with 54% of fuel consumption already hedged for next year. The group rebalanced capacity to North and South America amid Gulf carriers returning to near-normal levels.
Demonstrations and looting in France, part of wider European cost-of-living protests, will cost Air France €10 million in October and November due to cancellations.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing