Air France-KLM Stock Drops After Refraining from Profit Outlook

Air France-KLM left investors guessing about the strength of its recovery by abstaining from a full-year profit forecast and trimming its capacity prediction, providing a muted outlook that contrasts with IAG SA and its raised outlook for 2023.

(Bloomberg) — Air France-KLM left investors guessing about the strength of its recovery by abstaining from a full-year profit forecast and trimming its capacity prediction, providing a muted outlook that contrasts with IAG SA and its raised outlook for 2023. 

The Franco-Dutch group’s stock fell as much as 4.7% in Paris trading on Friday after the company reported earnings. The first-quarter net loss narrowed to €344 million ($380 million) from to €552 million a year earlier, Air France-KLM said, while revenue surged 42% to €6.33 billion, slightly exceeding analyst expectations. 

Air France-KLM issued a more cautious tone on its full-year capacity guidance, cutting back the outlook for the year to about 95% after previously saying it would reach as high as 100%. The company also said it would restores its equity first before resuming a dividend payout. 

Air France-KLM “continued to show strong revenue growth as well as robust cash flow generation thanks to the very encouraging summer ticket sales,” Chief Executive Officer Ben Smith said in the statement, adding that “we now stand on our own feet” after repaying the remaining portion of state aid.

Smith said in February that the company had “turned the page” on the Covid-19 pandemic, which had prompted an unprecedented industry slump and forced a government bailout. The exit from state aid gives Air France-KLM flexibility to resume its growth path. The CEO has already signaled interest in taking a stake in Portuguese flag carrier TAP SA as the government in Lisbon seeks an industry backer for an airline it was forced to rescue during the health crisis.

The global aviation industry has enjoyed a robust comeback since most countries lifted their coronavirus restrictions and people resumed travel for business and leisure. Deutsche Lufthansa AG this week provided an upbeat preview of the early summer months — the crucial travel period for the aviation industry. Earlier today, British-Airways parent IAG reported a surprise operating profit in the first quarter as bookings for the summer came rushing in and the airline group benefited from lower fuel prices. It also raised its outlook.

Air France-KLM said it entered exclusive talks with Apollo Global Management for a €500 million equity financing into an affiliate owning engineering and maintenance assets as it continues to restore its balance sheet. It also received “several” non-binding offers on equity financing supported by its loyalty program, with talks continuing with potential investors.

(Updates with analyst comment in third paragraph, capacity guidance in seventh.)

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