Air France KLM profit tops forecasts, shares soar

By Benoit Van Overstraeten

PARIS (Reuters) - Air France KLM (AIRF.PA), the world's biggest airline by revenues, posted a stronger-than-expected 28 percent jump in quarterly profit on Thursday, lifting its shares nearly 12 percent.

Profits were powered by strong demand, especially on longer routes, and by fuel surcharges and hedging which buffered the airline from surging oil prices.

Air France KLM shares jumped on the news and were Paris' biggest gainers, up 11.17 percent at 24.58 euros by 1606 GMT.

"Is the financial crisis hurting air transport demand? Reservations do not reflect a decline in demand for air transport .. We think this situation will last for the current fiscal year and beyond," Chief Executive Jean-Cyril Spinetta told a news conference.

Spinetta would not say if he was in contact with his counterparts at struggling Italian partner Alitalia AZPIa.MI or at Spain's Iberia (IBLA.MC), both of which are looking for buyers, but repeated his group was closely looking at the pair.

"European players must obviously think about European consolidation. We are closely looking at the Alitalia and Iberia dossiers ... Consolidation must strengthen the players' profitability, it must be its only goal," he said.

Vice Chairman Leo Van Wijk said this week that Air France KLM, formed from a 2004 merger, had not yet decided whether to bid for either firm.

Separately, La Tribune newspaper reported on Thursday that Air France-KLM was considering placing orders for about 100 long-range medium-sized aircraft and launching a tender for them next year that would pit the Airbus A350 (EAD.PA) against the Boeing 787 (BA.N).

Air France-KLM Chairman and Chief Executive Jean-Cyril Spinetta confirmed the airline would launch a tender for new aircraft but said it was too early to determine for how many, he told LCI television.

"What is true is that Air France-KLM needs to modernize its fleet," he said, adding it applied to a significant part of the airline's long-range fleet.

"So a choice will have to be made between Boeing's 787 and the A350 of Airbus." He said tenders would be launched in 2008 for delivery around 2013-2014.

CAPITAL GAIN

Air France KLM said operating profit rose to 725 million euros ($1.08 billion) for the three months to the end of September, while revenues of 6.489 billion euros were up 5.8 percent.

The operating results beat analysts forecasts which averaged 659 million euros while revenues were in line with expectations, according to Reuters Estimates.

Its fuel costs rose just 1.8 percent, as overall operating costs rose by 3.6 percent to 5.7 billion euros.