French carriers hit turbulence

Paris' Charles de Gaulle airport - not always a runway to success

Turbulence has beset the French airline sector, with the national carrier hit by rocketing fuel costs, and a major rival admitting it is on the verge of closure.

Air France, the country's flagship carrier, has revealed that thanks to a 95% rise in fuel bills, the firm operated at an underlying loss between October and December last year.

The truth forces me tell you that I do not know today whether this company can survive

Marc Rochet, chief executive, AOM, Air Littoral, Air Liberte

"The sharp rise in the price of fuel... weighed on the operating results," a statement on Tuesday said.

But a foreign exchange windfall realised with the strengthening of the euro allowed Air France to turn in a profit overall during the quarter.

And the airline, 56% owned by the French state, expects to report significant profits growth in the year to the end of March.

Rescue talks

The announcement followed the opening of emergency talks between union members and management at SAirGroup's French airline arm, which lost 2.5bn francs (£240m) last year.

The chief executive of the French operations, which SAirGroup had hoped to build into a rival to Air France, on Monday warned in a memo to staff that "the truth forces me tell you that I do not know today whether this company can survive".

On Tuesday the chief executive, Marc Rochet, warned union leaders that the carrier's financial state was "extremely serious", and that it was surviving only on an injection of 10m francs (£960,000) per day.

"This situation cannot continue, and our shareholders will only continue to support us if we rapidly apply concrete restructuring measures," Mr Rochet, who was appointed last week, was quoted as saying on Tuesday.

Routes axed

He is thought to be considering axing unprofitable routes, including flights to the Indian Ocean islands of Reunion and New Caledonia, where losses are said to be "enormous".

Closure of the operations, encompassing the AOM, Air Liberte and Air Littoral carriers, would threaten 7,000 jobs.

The news sent shares in SAirGroup, which also owns Swissair, down almost 7% on Tuesday to levels last seen in 1997.

The firm is also reassessing its stake in Belgium's national carrier Sabena, which has made a significant profit only once in the last 40 years.