Business

Air France warns of 'concern about France as a destination'

Air France plane Image copyright PASCAL PAVANI

Air France-KLM has warned there is concern about "France as a destination" as recent terror attacks affected sales in the second quarter of the year.

The airline group reported a 5% fall in revenue to €6.22bn (£5.2bn) compared with the same period last year.

Air France also joined other European airlines in warning of the impact from the "high level" of geopolitical and economic uncertainties.

However, operating profit rose 138% to €317m, partly due to lower fuel costs.

"The global context in 2016 remains highly uncertain... resulting in an increasing pressure on unit revenues and a special concern about France as a destination," the airline said.

Air France-KLM's results were issued hours after a priest was killed by two armed men in France, adding to a spate of attacks in Europe that has affected demand for travel and coming on top of the aftermath of the Brexit vote.

Gerald Khoo, an analyst at Liberum, said the results were "not as bad as feared" as fuel savings had offset the decline in sales.

Air France-KLM shares rose more than 3% in early trading.

"The company posted a slight improvement in profit and its share price is responding," said Neil Wilson, an analyst at ETX Capital.

"But the Franco-Dutch carrier's warning today about the future of European air travel is a stark reminder that this is a sector under pressure."

Image copyright Getty Images

Strikes

The strike by Air France pilots in June also reduced profit by an estimated €40m.

A fresh week-long strike by flight crews from 27 July will see the airline cancel some of its domestic and medium-haul flights.

UK airline Flybe said repeated industrial unrest in France had weighed on its second-quarter results.

Flybe said passenger revenue increased 5% to £155.8m, despite a slowdown in airline growth and the problems in France, a market which accounts for 12% of its sales.

"The current outlook is very uncertain and we have limited forward visibility due to our late booking profile," Flybe said.

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