Air France-KLM's Outlook in Focus as Olympics Weigh on Revenue -- Earnings Preview

By Pierre Bertrand

Air France-KLM is scheduled to report its second-quarter results on July 25. Here is what you need to know.

REVENUE: The Franco-Dutch carrier group is estimated by analysts to report 7.94 billion euros ($8.64 billion) in second-quarter revenue, according to a company-provided consensus. The result would be a slight increase compared with the EUR7.62 billion in quarterly revenue the company reported a year ago.

OPERATING INCOME: Analysts estimate the company will report EUR541 million in operating income, according to the same consensus. A year prior, Air France-KLM reported EUR733 million in operating income.

NET PROFIT: Air France-KLM is expected to report an on-year decline in quarterly net profit, according to a Visible Alpha consensus. Analysts estimate the company will report EUR357.2 million in profit for the second quarter. The company reported EUR604 million in second quarter profit last year.

Air France-KLM shares have traded down around 50% over the last 12 months and trade around 41% down from where they were at the start of the year.

WHAT TO WATCH

--Air France-KLM approaches its 2Q results publication date having negatively surprised the market earlier this month when it warned summer unit revenue for the June to August period would be hit by an estimated EUR160 million to EUR180 million thanks to international travellers avoiding Paris and French residents delaying vacations until after the Olympic games. "After a weak start to the year in terms of cost performance, the Olympic headwind adds another setback. As such, the company seems to be a long way from achieving its 7%-8% 'midterm' EBIT margin target, and--even more importantly--from getting the market to believe in it," Stifel analysts Johannes Braun and Marc Zeck say in a research note. The Olympics headwind adds to revenue and pricing uncertainty in the near term, JPMorgan analysts said in a research note. That said, Air France-KLM said it expected travel to and from France to normalize after the Olympics.

--Air France-KLM matching its 2023 performance looks increasingly challenging, Deutsche Bank analysts said in a research note. Estimated declines to operating profit in 2Q, adding to declines reported in 1Q, ought to be driven by increases to unit costs at its network business, with little unit revenue increases to offset, the analysts say. They anticipate the company to have faced 2% to 3% higher unit costs in the quarter, with flat unit revenue. Air France-KLM's outlook, cost control and its operational stability are likely to be closely watched by investors, UBS analyst Jarrod Castle said in a research note.

Write to Pierre Bertrand at pierre.bertrand@wsj.com

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July 22, 2024 05:36 ET (09:36 GMT)

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