Air France-KLM to increase seat capacity while keeping eye on low-cost rivals

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Air France-KLM are aiming to increase capacity on routes to Asia and Latin America to meet passenger demand as the group forecasts Q1 ticket prices to be positive.

The Franco-Dutch airline also plans to increase capacity by 3-4 percent overall on its main passenger network in 2018.

An operating figure of €1.4bn was reported in the group's latest financial results, up 42pc, but falling slightly shy of the €1.53bn forecast by the company.

A charge of €4.1bn was linked to a new pension deal for KLM pilots and cabin crew, lending to the group's overall net loss of €274m.

"We have been helped by the good environment," Chief Financial Officer Frederic Gagey said, adding Air France-KLM’s increase in profit was also helped by stable unit costs.

Strong travel demand and low oil prices were of benefit to the Paris-based carrier, like other large European airlines, while market competition has been reduced with the collapse of Monarch and Air Berlin.

Read more: Norwegian upbeat as loss hits share price

Air France-KLM is reporting a positive trend into 2018, with current long-haul forward bookings for the coming three months ahead of last year’s levels - up 1 percentage point in February, up 4 percentage points in March, down 1 percentage point in April (Easter), and up 2 percent for May.

The group said it was aiming for a reduction of 1-1.5pc this year, excluding the impact of currency, fuel and pension charges.

Mr Gagey said new high-speed train routes to Bordeaux had put pressure on unit revenues in the domestic market in France.

Analysts believe Air France-KLM will come under pressure from rising fuel costs this year, not to mention expansion of low-cost rivals in Paris and Amsterdam, which the group said it is watching closely

"But it seems that launching low-cost long-haul flights without connecting services is challenging," Gagey said, indicating Norwegian Air who reported a bigger than expected loss (€94.2m) for the last quarter of 2017.

IAG and Lufthansa are due to report over the next few weeks.