Profit lift for European giant

Air France-KLM Group, Europe's biggest airline, says its second-quarter net income rose 41 per cent, helped by cost cuts and increased demand for air travel.

Net income in the quarter to September 30 climbed to €201 million ($372 million) from pro forma net income of €143 million a year earlier.

The year-ago figures were restated to show results for the combined airline.

Air France, based in Paris, bought KLM in May, overtaking British Airways to become Europe's largest carrier.

The airline expects savings from combining operations such as purchasing and ticket sales to grow to €580 million annually within five years, or 17 per cent higher than its earlier forecast, said chief financial officer Philippe Calavia.

"What's impressive are the cost cuts," said Emmanuel Soupre, a fund manager at Neuflize Gestion in Paris, which holds Air France shares among US$15 billion in assets. "That proves the utility of the merger."

Air France shares rose 18c, or 1.3 per cent, to €14.20 in Paris. The shares have gained 17 per cent this year, compared with a 6.5 per cent rise for France's CAC 40 Index of stocks.

Passenger traffic grew by 7.7 per cent in the quarter, and capacity increased by 6.5 per cent. That led to a load factor, or percentage of seats filled, of 81.1 per cent, or a 0.9 percentage points better than a year earlier.

Operating profit was €295 million in the three months, and the company reiterated that full-year operating profit would exceed last year's.

"Synergies with KLM are going much faster and better than expected and passenger traffic has been robust, thanks to world economic growth," said Calavia.

Sales rose 6.4 per cent to €5.13 billion, the airline said.

Seven analysts surveyed by Bloomberg estimated median net income of €203 million.

The airline said its fuel costs rose 33 per cent. Air France has hedged 72 per cent of fuel requirements for the year, saving € about 13 per cent of the fuel bill.

- BLOOMBERG