Air France avoids turbulence

Air France well positioned for success

PARIS, France -- Unlike many of its rivals, Air France has managed to come through the post-September market turbulence relatively unscathed.

In a sector hit by falling fares and reduced capacity in the aftermath of the terrorist attack in the U.S. -- and the impact of a global economic slowdown -- Air France is still expected to turn a profit.

Europe's third largest airline, which is less reliant on trans-Atlantic routes than other major carriers, has managed to stay the course by cutting capacity by 16 percent and moving many of its planes onto to African and Indian Ocean routes, where the slump of air traffic has not been as severe.

The strategy was helped by the collapse of Belgium carrier Sabena and Swissair, which sent more passengers its way -- allowing Air France to keep its planes full enough to maintain pricing and profitability.

Just how profitable these moves have been will be know later on Tuesday, when Air France posts its results for the year ended March 31.

Analysts polled by Reuters expect the carrier to report earnings before interest and tax of 157 million euros ($144.7 million), down from 443 million euros a year earlier. Forecasts for net profit range from 73 million euros to 224 million euros, compared with 421 million euros a year earlier.

The French carrier is likely to strengthen its position in the industry through the growth of its charter and freight businesses, as well as its growing ties with Italian carrier Alitalia and its agreement with U.S. carrier Delta Airlines to share revenue and facilities on many international flights.

Air France (PAF) shares, which fell below 9 euros just after the September 11 attacks, are up 10 percent from the start of this year. They were unchanged at 18.20 euros in midday Paris trading on Tuesday.

"We believe there is considerable scope for further price appreciation as the traffic trends to the Americas become more positive and the cabin mix improves,'' Nick van den Brul, an airline analyst at BNP Paribas, told Reuters.

But it has not been all clear sailing for Air France.

Its traffic fell 3.3 percent in April from a year earlier. Load factor -- the measure of how well it filled available seats -- declined 1.4 percentage points to 77.9 percent. By comparison, British Airways had a load factor of 69.4 percent, Lufthansa 73.1 percent and KLM Royal Dutch Airlines 78.9 percent.

Air France, which is 56 percent state owned, could face a further reduction in government control depending on who wins next month's legislative elections.