A recovery in air travel and cost cutting lifted Air France-KLM back to a full-year operating profit, with its bottom line also boosted by a unit's share flotation.
The Franco-Dutch group posted a 2010/11 operating profit of EUR€122 million (USD$174 million) on Thursday after a EUR€1.4 billion turnaround in core earnings since the previous year.
Revenue rose 12.5 percent to EUR€23.62 billion.
Air France-KLM said it was "confident" in its ability to improve operating income this year but was also focused on reducing its 85 percent debt-to-equity ratio, prompting it to skip its dividend for the financial year to end-March.
International Airlines Group, formed by the merger of BA and Iberia, said this month it expected significant growth in operating profit this year as a continuing recovery in travel helps unit revenue and costs.
READY TO ADAPT CAPACITY
Like most airlines navigating through an economic recovery hampered by political instability and volatile oil prices, Air France-KLM expressed uncertainty about the Middle East and the aftermath of the Japan earthquake, as well as its fuel bill.
The various crises in the past few months shaved half a percentage point off its unit revenue in the fourth quarter.
"The oil price is very difficult for the world economy and air transport feels the effects more quickly than most," said Pierre-Henri Gourgeon, whose mandate as chief executive was renewed by the airline group's board.
"We have reduced our costs and improved performance and are much better positioned to face these uncertainties than before."
Fuel costs rose by EUR€186 million to EUR€1.43 billion in the fourth quarter ended March 31. Unit costs rose slightly.
Full-year net profit of EUR€613 million was boosted by a EUR€1 billion gain from a revaluation of the company's 15 percent stake in the Amadeus reservations system, which is now listed.
The underlying net loss was EUR€234 million.
Air France-KLM said it would be taking no chances this year with capacity on the North Atlantic, where the group complained about a glut of available competitor seats over the past winter.
Gourgeon said a joint venture between Air France-KLM and US carrier Delta would trim capacity by 10 percent compared with the previous year in the 2011/12 northern winter.
The group has announced a 5.7 capacity increase in the summer to absorb a "positive" trend in bookings but said it was ready to lower this to adapt to any bumps in the recovery.
Gourgeon unveiled the annual results for the last time on the company's current April-March reporting year, since the company plans to adopt the regular civil calendar from the end of 2011.