Air France-KLM cuts capacity levels on 'operational challenges'

Air France-KLM downgraded on Friday its capacity forecast for the third quarter, citing operational difficulties at airports that could weigh on the group's performance.

The airline company expects capacity in 'Available Seat Kilometers' for its passenger activity in the range of 80% to 85% in the third quarter from the same period in 2019, down from an estimate of 85% to 90% in May.

It predicted it would land again between 85% and 90% in the last quarter of the year.

"The strong recovery we see this summer is putting the entire aviation industry to the test," Chief Executive Officer Ben Smith said in an earnings statement.

"While Air France-KLM had prepared for close to pre-pandemic demand levels, our airlines are not immune to the major operational challenges taking place around the world."

Airlines across Europe are troubled by labour strife this summer as the rapid recovery in tourism found them with staff shortages and soaring inflation pushed cabin crews and pilots to demand higher wages and better working conditions.

Lufthansa, British Airways, easyJet and Wizz Air cut thousands of flights from their summer schedules to cope with the disruptions.

Air France and KLM recorded 70 million euros ($71.15 million) of additional compensation costs in the quarter.

The group's Dutch arm KLM announced earlier in July it had come to a collective labour agreement to increase wages for ground crew, putting an end to weeks of unrest.

Air France-KLM beat quarterly expectations as its core and net incomes turned to profits of 386 million euros and 324 million euros, respectively, both widely above analysts' average forecasts.

The company, whose activities include cargo, aeronautics maintenance, said the yield environment should remain high for the remainder of 2022, above 2019 levels thanks to a strong summer demand.

The group also flagged it would consider possible hybrid bond issuances of up to 1.2 billion euros later in 2022-2023.