Shares in Air France-KLM drop after profit warning

Air France-KLM shares have this week dropped 10% in value after the airline issued a profits warning and revealed that there was an excess of capacity on some of its routes.

The shortfall in profits has been attributed to a range of unfortunate factors including the pre-Christmas snow, industrial action and the civil unrest in Egypt and Tunisia. As a result of the carrier’s recent difficulties, it’s now likely that they will fall short of their annual profits target of £255m.

Knock-on effect

News of the Franco-Dutch airline’s troubles appear to have had a negative impact right across the industry as shares in other European airlines also fell as a result of the announcement. Stock in British Airways/Iberia fell by 5.3%, while Flybe and easyJet were also hit.

The airline’s response

When asked about the announcement, Chief Executive of Air France-KLM Pierre-Henri Gourgeon played down the doom and gloom saying that there had been an increase in capacity on routes between Europe and the US.

He also added a word of warning to other airlines who had succumbed to the temptation to put seats back onto the market more quickly than the economy could justify.

“The increased capacity we are seeing in this winter season is very high and much higher than it should be,” Mr Gourgeon told analysts.

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