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Air France-KLM low-cost plan

Friday, July 25 08:08:39

Air France-KLM posted a sharp increase in core profit for the second quarter and announced a new 2015-2020 plan to recapture market share from low-cost rivals in Europe.

Europe's second largest traditional carrier by revenue joined its bigger rival Lufthansa in trying to win back business from low-cost champions such as easyJet and said it was prepared to use acquisitions to achieve its aim.

Air France-KLM has been reducing costs and debt as part of its "Transform 2015" plan, which is due to end in a few months.

The new plan, "Perform 2020" will focus on maintaining its position in long-haul markets while try to achieve growth in short-haul markets. Details will be announced in September.

"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.

Formed from a merger of French and Dutch carriers in 2004, Air France-KLM has been relatively cautious about further consolidation and recently allowed its shareholding in Italy's Alitalia to be diluted in the absence of guarantees on its debt.

De Juniac seemed relaxed about subsequent plans for a tie-up between Alitalia and Abu Dhabi's Etihad, with which Air France also has a codeshare deal, and said he hoped to strengthen business ties with its Skyteam partner in Italy.

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. [IDL:nL6N0PL33N]

Air France-KLM reported 641 million euros ($863 million)in earnings before interest, tax, depreciation and amortisation (EBITDA) in the second quarter, up from 510 million in the same quarter of last year.

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.

(Reuters)

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