Air France-KLM reports worse than expected Q1 results as costs soar

By Joanna Plucinska and Diana Mandia

LONDON/GDANSK (Reuters) - Airline group Air France-KLM on Tuesday reported a higher than expected first quarter operating loss of 489 million euros ($524.31 million) as it faced high customer compensation at Dutch carrier KLM and one-off payments to staff.

European airlines have been struggling with climbing costs surrounding labour disruption and geopolitical turbulence in recent months, with German group Lufthansa issuing a profit warning earlier in April tied to strikes.

Still, Air France-KLM maintained its outlook, including a vow to keep a rise in unit costs capped at 1-2% for the 2024 financial year, even though they climbed to 4% in the first quarter.

"As anticipated, our operating income was impacted by disruption costs and a slower cargo business. We nonetheless remain confident in our ability to achieve our 2024 unit cost outlook," Chief Executive Ben Smith said in a statement.

Analysts had forecast the group's Q1 loss at 424 million euros, according to a company-compiled consensus, while last year's Q1 loss was 306 million euros.

Net income was also lower than forecast, with analysts expecting a loss of 407 million euros ($436.39 million) and the company reporting a loss of 480 million euros ($559.69 million).

Specifically, a poor operational performance at KLM between December 2023 and early March led to compensation payouts to customers amounting to around an additional 50 million euros, with costs going up at suppliers and air traffic control services more broadly, too.

($1 = 0.9327 euros)

(Reporting by Joanna Plucinska in London and Diana Mandia in Gdansk; and Editing by Sandra Maler)