Air France expansion lags behind KLM, stoking sibling tensions

Paris

AIR FRANCE-KLM Group's annual traffic figures show that the company's Dutch arm again grew faster than its French sister carrier, where flights were disrupted by strikes as pilots pushed for higher pay.

KLM boosted revenue passenger kilometres - the number of customers times the distance flown - by 4 per cent in 2018, compared with a gain of just 1.9 per cent at Air France and its domestic unit Hop!, according to a statement on Wednesday.

The imbalance is reflected in higher profit margins at KLM that have been a source of tension within the group since Air France acquired the Dutch business in 2004. New chief executive officer Ben Smith must seek to placate French pilots without alienating their counterparts in the Netherlands and further inflaming those strains.

Group traffic rose 3.5 per cent, lagging behind a 7.1 per cent advance reported by rival IAG SA on Tuesday. The London-based carrier is expanding after CEO Willie Walsh defeated a pay strike by British Airways cabin crew and cut jobs to pare costs at Spanish unit Iberia.

Mr Smith, who took over in December after his two immediate predecessors were forced out, is expected to unveil his strategy in the next few months. The Canadian struck an initial deal with labour groups in October, but talks with powerful pilot unions continue.

Air France-KLM's passenger tally rose 2.8 per cent to 101 million, including discount arm Transavia, and the company may retain its status as Europe's largest carrier by traffic. But in an industry with notoriously thin margins, size certainly isn't every-thing.

Air France-KLM shares fell 30 per cent last year, compared with a 5 per cent drop at IAG and a near 36 per cent slide at Germany's Deutsche Lufthansa AG, which reports traffic figures on Thursday. BLOOMBERG