Air France-KLM expects fuel costs to increase by $2.4
billion this year due to the ongoing Middle East crisis and, as a result, has
downgraded its full-year capacity outlook.
In an earnings call on Thursday, the Franco-Dutch aviation
group said its fuel hedging strategy had helped to protect yields in the first
quarter, despite the price of jet fuel rising nearly 84 percent since the start
of the conflict on February 28. The company anticipates its total fuel bill for
2026 to reach $9.3 billion.
Air France-KLM chief financial officer Steven Zaat warned of
a “significant” $1.1 billion increase in fuel costs for the second quarter,
stressing the group’s “tactical” approach to monitoring fuel prices. Airfare
increases have also done little to stifle demand—particularly for the upcoming
summer season.
The group reported “strong” summer demand, with
forward-booking load factors largely on par with 2025 results: 72 percent of
long-haul travel in Q2 has already been booked (compared to 73 percent at the
same time last year), along with 64 percent of short-haul travel bookings
(compared to 63 percent in 2025).
After rival Lufthansa announced
plans to cut 20,000 flights this summer, Air France-KLM CEO Benjamin Smith
reassured analysts on the call that the group expects to fly “the whole
schedule of Air France-KLM until the end of Q3.”
Additionally, Smith said the group has not encountered jet
fuel shortages at its European hubs and has received “no indication” of any
short-term fuel shortages across the region.
Moving into winter, however, Zaat warned that capacity cuts
are likely if fuel prices remain high.
The group said it expects full-year capacity to rise between
2 percent and 4 percent in 2026, down from a previous forecast that put growth
at between 3 percent to 5 percent.
Q1 metrics
Air France-KLM reported a first-quarter operating loss of
€27 million, which marked an improvement of €301 million compared
to Q1 2025.
The group reported an initial demand boost after the start
of the Iran war, particularly on routes to Asia, as travelers looked to avoid
Gulf hubs. Smith also described demand increases in Asia as an “opportunity” to
attract new corporate business.
Group revenue per available seat kilometres in the first quarter was up 0.5 percent
year-on-year. Group capacity and traffic also increased 4 percent and 4.4 percent,
respectively, despite winter storms disrupting
KLM services in January.
Load factor increased by 0.3 percentage points to 86.3 percent, while passenger
yields were “strong,” particularly across the airlines’ premium cabins.
"While fuel price increases are not yet reflected in the results we
present today, they are expected to weigh on
the coming quarters," Smith said in a statement.
“We’ve already
introduced measures to support our financial performance through disciplined
cost management and continue to monitor the situation closely. While the
environment remains uncertain, we remain committed to the execution of our
strategy,” he said.
TAP Air Portugal
Air France-KLM on Thursday said it has been selected by the
Portuguese government to submit a binding offer for a minority share in TAP Air
Portugal. Earlier in April, both Lufthansa and Air France-KLM had submitted
non-binding offers for a 44.9 percent stake in the carrier.
Smith reiterated that, if the bid succeeds, the company
plans to make Lisbon its southern European hub.