* Q2 EBITDA 641 million euros vs year-ago 510 mln
* Gross operating margin rises to 9.9 pct from 7.8 pct
* Sales up 1.7 pct on like for like basis to 6.45 bln euros
* Shares up 5 pct
(Adds consultant quote, background, updates shares)
By Cyril Altmeyer and Tim Hepher
PARIS, July 25 Air France-KLM posted a
sharp increase in core profit for the second quarter and
announced a 2015-2020 plan on Friday to recapture market share
from low-cost rivals in Europe, helping push its shares up more
than 5 percent.
Europe's second-largest traditional carrier by revenue
joined rivals Lufthansa and IAG in trying to
win business from low-cost champions such as easyJet. It
said it was prepared to use acquisitions to achieve its aim.
Air France-KLM has been cutting costs and debt as part of
its three-year "Transform 2015" plan, which is due to end in a
Its new plan, "Perform 2020", will focus on maintaining the
group's position in long-haul markets in the face of competition
from Gulf carriers while looking to capture growth and cut costs
in short-haul markets.
"The consolidation of the low-cost sector is under way and
we want to take part," Chief Executive Alexandre de Juniac said.
"The idea is to be in the leading group of European low-cost
carriers, given that aviation is a business where size is
important," he told reporters.
The company also plans acquisitions in maintenance and
overhaul where it wants to offer services to external clients.
Details of the plan, which follows a review by the head of
the airline's French unit, will be announced in September.
Air France-KLM shares, which this month hit a five-month low
of 8.20 euros, were up 4.3 percent at 9.0 euros by 1145 GMT.
Lufthansa rose 1 percent in a slightly weaker market.
The plan to counter the low-cost boom in Europe comes weeks
after Lufthansa's new chief executive announced plans to expand
its low-cost services under new brands, though some analysts
have questioned the move.
Several network carriers have already set up or acquired
their own low-cost units to mimic the success of Britain's
easyJet and Europe's largest budget carrier, Ryanair.
They include Lufthansa's Germanwings and Vueling,
which is owned by British Airways/Iberia parent IAG.
But running low-cost operations, based on point-to-point
travel, alongside the hubs and frequent-travel schemes of large
union-based carriers is rarely simple, analysts say.
"Very few traditional airlines have ever managed to operate
low-cost operations that are really low cost. The only one
really doing so is IAG," said aviation consultant James Halstead
of UK-based Aviation Strategy.
Air France-KLM's Dutch-based low-cost and charter unit
Transavia has so far been the main arm for cutting costs in the
Inherited from KLM in the 2004 merger with Air France in
2004, it carried 8.9 million passengers last year compared with
78.4 million for the whole group.
Air France-KLM's recent efforts to compete on medium-haul
include a new lower "Mini" fare and speeding up development of
Transavia France. But a switch to provincial bases on Air
France's domestic network suffered against low-cost competition.
Air France-KLM on Friday reported 641 million euros ($862.2
million) in earnings before interest, tax, depreciation and
amortisation (EBITDA) in the second quarter, up from 510 million
a year earlier.
Its gross operating margin rose to 9.9 percent from 7.8
percent on sales of 6.451 billion euros, which were up 1.7
percent on a like-for-like basis. Operating profit almost
It reaffirmed its latest profit and debt goals for 2014 in
the wake of a profit warning this month, but said it remained in
a "tough" environment due in part to overcapacity on some
long-haul routes, notably to North America and Asia.
Passenger profits more than doubled to 255 million euros due
to tight controls on capacity and a bigger-than-expected 4.4
percent drop in unit costs. But the cargo business remained in
the red due to a slower than expected economic recovery.
Air France-KLM took a 106 million euro charge on its
loss-making cargo planes and said it was also looking at a
partnership or restructuring of its full-freighter business.
(Editing by David Holmes and Jason Neely)