Air France stays on course

Air France well positioned for success

PARIS, France -- Air France, Europe's third largest airline, on Tuesday posted a huge drop in full-year profits due to the downturn in air travel following the terrorist attacks in the United States.

However, the carrier still managed to come through the post-September market turbulence in better shape than many of its rivals and with better-than-expected financial results.

Air France said net profit for the year ending on March 31 fell 64 percent to 153 million euros ($142.29 million ) from 421 million euros a year earlier. Operating profit fell 47 percent to 235 million euros from 443 million euros in the previous year.

Analysts polled by Reuters had expected net profit of between 73 million euros and 224 million euros, with operating profit coming in about 157 million euros.

In a sector hit by falling fares and reduced capacity in the aftermath of the terrorist attack in the U.S. -- and the impact of a global economic slowdown -- Air France's profitability sets it apart from other major carriers.

Air France, which is less reliant on trans-Atlantic routes than its rivals, has managed to stay the course by cutting capacity by 16 percent and moving many of its planes onto to African and Indian Ocean routes, where the slump of air traffic has not been so severe.

The strategy was helped by the collapse of Belgium carrier Sabena and Swissair, which sent more passengers its way -- allowing Air France to keep its planes full enough to maintain pricing and profitability.

Analysts expect the French carrier to strengthen its position in the industry through the growth of its charter and freight businesses, as well as its growing ties with Italian carrier Alitalia and its agreement with U.S. carrier Delta Airlines to share revenue and facilities on many international flights.

Air France (PAF) shares, which fell below 9 euros just after the September 11 attacks, are up 10 percent from the start of this year. They were little changed at 18.21 euros on Tuesday in Paris, with its financial results coming out after the close of trading.

Despite the better-than-expected results, it has not been plain sailing for Air France.

Its traffic fell 3.3 percent in April from a year earlier. Load factor -- the measure of how well it filled available seats -- declined 1.4 percentage points to 77.9 percent. By comparison, British Airways had a load factor of 69.4 percent, Lufthansa 73.1 percent and KLM Royal Dutch Airlines 78.9 percent.

However, it said on Tuesday it expected to increase capacity by 4.2 percent this year. It also hopes to improve profits in the current year and in 2003/04.