Air France-KLM trims loss, warns of turbulence as pilots' pay cut

Air France-KLM said Wednesday it cut its losses in the first quarter of 2016 but passenger traffic to Paris was affected by terror attacks and the airline also warned of a difficult year ahead as it moved to cut wages of French pilots.

The Franco-Dutch group enjoyed lower fuel prices but said this was likely to be offset over the rest of the year by pressure on revenue and by the negative impact of currency swings.

Air France-KLM reported a net loss of 155 million euros ($178 million) in the three-month period, which was overshadowed by a deadly attack on Brussels airport. This compared to a loss of 559 million euros in the same period a year earlier.

Revenue edged up 0.4 percent to 5.6 billion euros in the same period.

"The global context in 2016 remains highly uncertain regarding fuel prices, the continuation of the overcapacity situation on several markets and the geopolitical and economic context in which we operate," Air France-KLM said in a statement.

"As a consequence, the group expects the forecasted savings on the fuel bill to be significantly offset in the coming quarters by unit revenue pressure and negative currency impacts."

The airline said it was sticking to its forecasts for this year, including cutting unit costs by around 1.0 percent and a cutting its net debt -- now standing at 4.16 billion euros -- significantly

"Despite a difficult environment marked in particular by the Brussels attacks, the upgraded product offer, the commercial efforts and the ongoing network adaptation have enabled the group to limit the unit revenue decline and to retain a substantial part of the fuel savings," outgoing chief executive Alexandre de Juniac said in a statement.

Two suicide bombers struck Brussels airport on March 22, while a third attacker blew himself up at on a metro train. The twin attacks, which killed 31 people, came barely four months after the November 13 attacks in central Paris that killed 130 people.

Air France-KLM finance director Pierre-Francois Riolacci said traffic to Paris had been affected "terrorist events", especially for Japanese customers.  

Despite being hard hit by the Paris attacks, Air France-KLM managed last year to post its first annual operating profit since 2008 as it reaped the benefits of cost cutting measures as well as lower fuel prices.

It also posted a net profit of 118 million euros.

- Cuts to pilots' wages -

The airline group has decided to push forward with cost cutting efforts as board of directors also authorised Air France to cut the wages of pilots beginning on June 1.

The move follows court efforts by SNPL, the top union among pilots, to block the cuts which were accepted by a majority of pilots as part of a cost savings effort in which ground and cabin crew also accepted reductions.

The pilots will see their night pay rate drop as well as a less favourable calculation for their ground preparations, which could produce up to 30 million euros in savings per year for the airline.

"There has been no recourse to force," the airline group's human resources chief, Gilles Gateau, announced late Tuesday after the board meeting, noting that a local and appeals court had allowed the company to move forward.

The SNPL decried management's resort to forcing through the cuts, said it would continue dispute the move in courts, and threatened a strike.

That could become a costly setback to efforts to improve the company's finances as a two-week strike by the pilots in September 2014 crippled the airline and cost 416 million euros in turnover.

Tensions have been running high at the French national airline, after two executives had their shirts ripped off by employees, angry at the announcement in October last year to cut another 2,900 jobs.