Air France-KLM Warns of Revenue Pressure, Currency Woes

Air France-KLM  on Wednesday warned investors of turbulence ahead as it reported a narrowing of its operating loss in the quarter ended March.

The airline's warning of "downward pressure" on  revenue and of currency headwinds in 2016 eclipsed above-forecast first-quarter figures published on Wednesday. These included an operating loss which narrowed to €99 million ($113.7 million) from €417 million.

But Air France-KLM said the pressure it foresees in the full year will offset the impact of lower fuel costs and other savings. 

Its shares in Paris were recently down 4.8% at €7.33.

Air France-KLM's first-quarter revenue dropped 1.3% year-on-year, excluding currency fluctuations, with the cargo segment suffering a 16.9% drop. That said, the segment accounts for just 9% of total revenue. Operating costs were down 7.6%. The most notable gain came from fuel costs, which fell 30.5%.

Air France-KLM, which competes with the likes of Germany's Lufthansa (DLAKY) and British Airways owner International Consolidated Airlines (ICAGY) , has, like its peers, sought to streamline to counter intensifying competition, especially from low-cost carriers. In the first quarter, restructuring costs, mainly linked to voluntary redundancies, increased to €151 million from €56 million. Over the past year, the company cut its headcount by 3,027, including temporary staff.

The passenger segment saw capacity rise 1.1.% in the first quarter but revenue per available seat mile, or RASK, dropped 1.3% on a constant currency basis. Meanwhile, the cargo segment faced weak demand, with revenue per available ton kilometer, or RATK, down 10.8%.