Air France-KLM returns to operating profit as net loss mounts

French airline Air France-KLM, struggling against low-cost competition, raised operating performance last year despite an increased net loss, the company reported on Thursday. The Air France group, the second-biggest airline in Europe after Lufthansa of Germany, reported that its restructuring efforts had generated a switch back in to an operating profit of 130 million euros. The airline is trying to adjust to established low-cost competition and to the rise of relative newcomers in the Middle East and Asia, all in the context of a weak economic climate in several of its markets. The net result showed an increased loss of 1.83 billion euros ($2.5 billion) last year from 1.22 billion euros in 2012. But finance director Pierre-Francois Riolacci said this reflected a technical writedown related to tax flows and had absolutely no effect on the company's cash position and solvency. Sales edged up slightly by 0.4 percent to 2.52 billion euros. Air France shares were almost flat, with a gain of 0.03 percent to 9.09 euros in early trading. Chief executive Alexandre de Juniac, in charge of the company for less than a year, told journalists when the results were published that "we do not need a capital increase because our ratios are improving". In a results statement, he said: "2013 marked an important stage in the group's turnaround. We are clearly benefiting from the successful implementation of new working conditions and of the industrial plans adopted in all our businesses." The company launched radical cost-cutting measures and steps to change work practices two years ago, and had to adapt extra measures in October. These latest steps were being put into effect for medium-haul and cargo activities and "will start to bear fruit in the second half," de Juniac said. The group continued to focus on "strict cost discipline". Under the three-year restructuring, called "Transform 2015", the Air France part of the group shed 5,122 jobs in 2012 and announced a further 2,800 last year. Between 2011 and 2015, the company would have cut about 10,000 jobs, de Juniac said. At the end of 2013 the group employed nearly 97,000 people from 106,000 in 2011. - Partnership in Brazil - The group had been bleeding cash and was also being strangled by high debt. De Juniac said that last year debt had been reduced beyond targets to 5.3 billion euros at the end of 2013 from 5.9 billion euros at the end of 2012, a reduction of 618 million euros. The group is counting on its low-cost tourism airline Transavia to win back market share from low-cost airlines, but this unit's operating performance showed a net loss of 23 million euros after a balanced outcome in 2012. Late on Wednesday, the group said it had signed a strategic partnership with Brazilian airline Gol Linhas Aereas Inteligentes, offering Air France-KLM a stronger position in South America. Brazil, which is to host the football World Cup this year and the Olympic Games in 2016, is a source of rising business traffic, the French group said. The group already has an agreement with US company Delta Airlines for trans-Atlantic routes.