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Air France-KLM shares sink as travel chaos darkens outlook

FILE PHOTO: Logo of airline company Air France at the Nantes-Atlantique airport in Bouguenais

By Dina Kartit, Juliette Portala and Toby Sterling

(Reuters) - Air France-KLM on Friday cut its capacity forecast and its Dutch arm warned of losses due to prolonged curbs on flights at Amsterdam's Schiphol airport, prompting a major share sell-off.

The carrier's shares dropped more than 16% and were set for one of their biggest one-day falls in almost 25 years as investors worried it may miss out on a travel boom spurred by the end of COVID-19 lockdowns.

Air France-KLM and British Airways-owner IAG beat earnings expectations for the seasonally strongest third-quarter on Friday, while Finland's national carrier Finnair reported its first positive quarter since the pandemic took hold in 2020.

But the region's airlines are struggling with staff shortages and labour disputes as cabin crews and pilots demand better working conditions and higher wages to offset inflation.

Schiphol, one of Europe's busiest airports, said last month daily passenger numbers would be reduced by around a fifth until at least March 2023 to guarantee the safety of passengers and employees, forcing KLM to limit ticket sales for the coming winter.

The Dutch airline, the main carrier at Schiphol, has faced sharp cost increases because of high oil prices, inflation, supply chain shortages and costs associated with rebooking and compensating passengers, it said in a statement.

A KLM spokesperson said that issues at the hub had cost 175 million euros ($174.27 million) since April.

This includes 30 million euros in direct costs for passenger compensation and additional 145 million euros in missed income.

Problems at Schiphol "are costing KLM a great deal of money and limiting the number of flights (it) can operate", KLM's Chief Executive Officer Marjan Rintel said.

Staffing difficulties and queues have persisted into the Netherlands' autumn school vacation period this month.

Air France-KLM said it planned to operate about 85% of network airlines' pre-pandemic capacity in the fourth quarter, against an earlier range set between 85% and 90%.

Yan Derocles, analyst at ODDO BHF, said the outlook was disappointing after upbeat comments from German rival Lufthansa on Thursday and BA's owner earlier on Friday.

Air France-KLM's quarterly core profit beat expectations, as it reported favourable demand recovery despite lower capacity and inflationary pressure.

The airline posted operating income of 1.02 billion euros in the third quarter, against an average estimate from analysts polled by the company at 844 million. Quarterly revenue was 8.11 billion euros, above 2019 levels.

($1 = 1.0042 euros)

(Reporting by Dina Kartit, Juliette Portala and Toby Sterling, editing by Josie Kao, Jane Merriman and Barbara Lewis)