Air France-KLM cuts losses, says more cost-saving needed

Struggling airline group Air France-KLM said on Friday it had reduced net losses in the first half of this year but that more cost-saving would be needed to pull it out of the red.

The French-Dutch airline is in the midst of a major restructuring plan as it struggles to cope with the rise of low-cost airlines and competition from Middle Eastern and Asian carriers.

In its half-year earnings statement, the company said its net losses for the first half of 2013 were 793 million euros ($1.05 billion), against losses of 1.27 billion euros in the first half of last year.

The second quarter of this year saw a marked improvement, with net losses at 163 million euros, against losses of 897 million euros in the second quarter of 2012.

The company even managed to post an operating profit of 79 million euros in the second quarter, after suffering an operating loss of 79 million euros in the same period last year.

"For the past year our results have improved quarter after quarter, in spite of the persistently tough economic environment," CEO Alexandre de Juniac said in a statement.

"Nevertheless, revenues remain below target," he said, adding that "further measures" would be adopted in the fall to reduce costs, including new staffing cuts.

A meeting with employees will take place on Wednesday to discuss the required number of job reductions, he said.

De Juniac said "industrial and commercial decisions" would also be taken to reduce costs, but did not elaborate.

Last year, the company announced a vast recovery plan dubbed "Transform 2015" that has already led to more than 5,000 job cuts among its about 100,000 staff.

Wages have also been frozen and the fleet of aircraft trimmed.

The company's sales were at 6.58 billion euros in the second quarter, a 1.2 percent increase year-on-year, bringing total half-year sales to 12.3 billion euros, up 1.3 percent.

The company said its net debt, which weighs heavily on the group, fell by more than 600 million euros to 5.3 billion euros.

"We are on the right track on all fronts," De Juniac said.

Juniac added that Air France was in discussion with Abu Dhabi's Etihad on deepening their existing code-sharing partnership into "something more structural".

Etihad is on a partnership spree worldwide in and in May expanded cooperation with Air France-KLM to Africa, Australia and Europe beginning this summer.

Philippe Calavia, Air France chief financial officer, said Air France and Etihad were looking to broaden the agreement beyond sharing capacity to "something more economic".

"It does not involve capital, but beyond filling seats, we can share revenue or some costs," Juniac said.

The price of shares in the group was showing a loss of 1.15 percent to 6.2910 euros in afternoon trading. The CAC 40 index was up 0.37 percent.