Air France warns on profit as overcapacity hits prices
By Andrew Callus and Tim Hepher
PARIS (Reuters) - An Air France-KLM profit warning bruised European airline shares on Tuesday, as the latest evidence of overcapacity set the stage for possible further job cuts.
Europe's second-largest traditional network carrier warned its 2014 profits could be as much as 12 percent lower than previously predicted, mainly as a result of overcapacity and resulting weak prices in both the passenger and cargo sectors.
Shares in the Franco-Dutch group fell more than five percent to 8.9 euros in early trading, reaching their lowest level since late February and dragging the European airline sector lower.
Its warning comes weeks after a similar jolt from Germany's Lufthansa, which warned on profit targets for 2014 and 2015 due to weaker-than-expected passenger revenue and cargo trends.
Among the factors it blamed were overcapacity on North Atlantic routes and competition from low-cost and Gulf carriers.
Since the Lufthansa statement, other smaller players have warned on profit such as Icelandair and Jet2.com (part of UK-listed Dart), SAS has said it will step up cost cuts while U.S. based Delta disappointed with its revenue figures.
"This warning is not entirely surprising given Lufthansa’s warning in June for the same reasons and the recent 21 percent decline in Air France-KLM’s share price," said Citi Research analyst Andrew Light in a note.
"We expect further restructuring actions to be announced later in the year." Continued...