Air France-KLM expects a $2.4 billion increase in its fuel bill this year due to disruptions in the energy market caused by the war in Iran, the group said on Thursday, while revising down its capacity outlook.
Kerosene generally represents one-third of most airlines’ costs. With prices skyrocketing since the start of the conflict in late February, hedges taken out against price increases are becoming less effective, forcing European carriers like easyJet and TUI to revise their forecasts.
“Although fuel price increases are not yet reflected in the results we are presenting today, they are expected to weigh on the quarters to come,” said Ben Smith, CEO of Air France-KLM, in a statement accompanying the first-quarter earnings report.
The airline said it expects total fuel costs for the year to reach $9.3 billion, with nearly half of that extra cost – $1.1 billion – anticipated in the second quarter.
Companies have implemented a series of measures – from raising ticket prices to optimizing flight occupancy rates, and reducing capacities – to try to mitigate the impact of high fuel costs.
The Chief Financial Officer, Steven Zaat, stated during a telephonic press conference that the company should have a stable supply until June. He expressed hope that European strategic stocks would be released and EU guidelines finalized to allow Jet-A fuel imports from North America to compensate for limited shipments from the Middle East.
Thanks to strong pre-war bookings and passenger preference for European carriers, Air France-KLM reported a smaller first-quarter loss than analysts had feared.
The group adjusted its capacity growth forecast for 2025 to a range of 2% to 4%, compared to the previous estimate of 3% to 5%.
Analysts noted that the capacity reduction was less than expected, leading to a 3.5% increase in the company’s stock by 12:00 GMT.
Air France-KLM reported an operating loss of 27 million euros ($31.6 million) in the first quarter, improving by 301 million euros compared to last year, even though fuel price hikes had not yet impacted quarterly results.
The company said it benefited initially after the start of the conflict in Iran, with more travelers choosing European carriers for flights to Asia and succeeding in capitalizing on its upscale strategy.
However, as the conflict continues, the group anticipates more moderate increases in its long-haul capacity, as customers postpone reservations due to financial travel risks.
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