Air France-KLM, Europe’s third-largest airline by passengers, recorded an operating loss of 300 million euros, or about $400 million, for 2012, compared with a 353 million euro loss a year earlier, as efforts to rein in seat capacity led to higher average fares. Revenue for the year rose 5.2 percent to 25.6 billion euros, while net debt declined to 6 billion euros from 6.5 billion euros in 2011.

But one-time expenses associated with a deep restructuring begun last year widened the airline’s net loss to 1.19 billion euros from 809 million euros in 2011.

“They have made a good start, but it is an improvement that is still just barely visible,” said Yan Derocles, an airline analyst at Oddo Securities in Paris.

Air France-KLM unveiled plans last June to shave more than 2 billion euros in costs, reduce debt and return to profit by the end of 2015. Despite the modest improvements achieved in the plan’s first six months, Jean-Cyril Spinetta, the group’s chief executive, stressed Friday in a statement that the company had laid the ground work for a more significant recovery this year.

“In 2013, we will maintain strict discipline in terms of capacity management, investments and costs,” Mr. Spinetta said.

Air France-KLM said passenger traffic rose by 2.1 percent last year, while seat capacity increased by just 0.6 percent. But while revenues per available seat rose by 5.9 percent from a year earlier, cargo revenues continued to slide, falling by 6.3 percent despite a 3.5 percent drop in capacity, as the economic slowdown reduced goods shipments.

Despite intense pressure from the French government to avoid layoffs, Air France-KLM moved ahead with plans in 2012 to slash more than 5,100 jobs at its Air France unit by the end of this year — just over 10 percent of its work force of 49,000. Another 1,300 jobs are being eliminated at its smaller KLM unit.

Philippe Calavia, the group’s chief executive officer, said Friday that the group had reduced staff by around 2,000 in 2012 through early retirements and other voluntary departures. Restructuring costs linked to those job cuts amounted to 471 million euros in 2012.

Labor costs have been a major drain on profit at Air France-KLM for years — equivalent to more than 30 percent of the group’s total revenue and even exceeding its fuel bill, which amounts to around 26 percent. By contrast, labor costs as a share of revenue are less than 10 percent at its low-cost rival Ryanair and 12.4 percent at EasyJet, according to the Center for Aviation in Brussels.

Given the uncertain outlook for the European economy this year, Air France-KLM declined to provide a forecast for 2013, although Mr. Calavia maintained the company’s targets of reaching net profit within two years. Analysts said they expected a modest improvement in operating profit this year, although annual restructuring costs were also expected to rise, possibly above 500 million euros.

Air France-KLM continues to lag behind its larger rival, Lufthansa of Germany, in its efforts to return to profitability. Lufthansa, which announced its own painful restructuring last year that involved 3,500 job losses. Lufthansa this week reported a net 2012 profit of 990 million euros, bolstered by asset sales, compared with a loss of 13 million euros in 2011. The German carrier also suspended dividend payments to shareholders in order to make more cash available to finance its turnaround.

Article source: http://www.nytimes.com/2013/02/23/business/global/23iht-airfrance23.html?partner=rss&emc=rss