Air France, Air Canada losses widen

Two airlines reported first-quarter losses due partially to rising fuel costs. Air France-KLM Group said its first quarter loss widened as fuel costs and a drop in freight volumes wiped out benefits from gains in passenger traffic, increasing pressure to secure cost cuts from unions by a June deadline. Air Canada, the country's largest carrier, posted a wider first-quarter loss as fuel expenses rose and it booked costs tied to the restructuring of a former maintenance unit now called Aveos Fleet Performance. Air France-KLM's operating loss widened to €597 million (Dh2 billion) from €403 million a year earlier, Europe's biggest airline said in a statement yesterday. That's bigger than the €510 million loss predicted by analysts in a Bloomberg survey. "It's worse than expected," said Frank Skodzik, an analyst at Commerzbank in Frankfurt. "The deviation is mainly coming from a very weak performance in cargo, while the passenger business benefited from tight control of capacity and a better-than-expected rise in prices." Skodzik rates the stock "add". With the annual fuel bill expected to increase by €1.1 billion and the first-half loss likely to widen from last year's €548 million, talks with unions on delivering €2 billion of cost cuts announced in January are critical to the turnaround, the Paris-based company said. "In this context, the group is highly focused on the negotiations under way, the successful outcome of which will enable it to significantly improve its economic efficiency between now and 2014," it said in the statement. Air Canada's net loss was C$210 million (Dh782 million), or 76 cents a share, compared with C$19 million, or 7 cents, a year earlier, Montreal-based Air Canada said yesterday in a statement. Revenue advanced 7.6 per cent to C$2.96 billion. Air Canada's fuel bill rose 20 per cent to C$889 million, and it booked costs of C$120 million tied to Aveos, which shut down and filed for insolvency protection March 19. The airline was required to pay severance to as many as 1,500 workers.