Air France-KLM cuts capacity plans

Air France-KLM, Europe’s largest airline, is halving its planned rate of capacity growth for the coming winter and 2009 summer seasons in response to the slowdown in air travel’s growth rate.

The carrier said on Monday it had adjusted its growth forecasts to take account of record oil prices and the expected impact on demand from rising air fares and higher fuel surcharges.

Capacity is expected to grow by about 2 per cent year-on-year for the 12 months from the end of October, half the rate forecast by the group in May, when it warned operating profit could fall by a third this year under the impact of the surge in fuel prices.

Jean-Cyril Spinetta, chairman and chief executive of the world’s largest airline by turnover, has said air fares will have to rise as airlines are forced to pass part of the higher fuel costs on to customers. He has admitted the scale of the increases will hit demand for air travel.

The airline said on Monday its traffic in June had risen by 2.6 per cent, lagging a 4.1 per cent growth in capacity. British Airways last week said passenger traffic had fallen 3.4 per cent year-on-year in June as capacity rose 1.7 per cent.

Air France-KLM said on Monday it was still planning “modest” capacity growth in the next 12 months compared with the cuts being announced by many airlines.

The biggest reductions to date are being implemented by the larger US network carriers, which have already announced plans to ground hundreds of older aircraft and cut thousands of jobs in the face of mounting losses.