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Last Updated: Friday, 2 September 2005, 16:54 GMT 17:54 UK
Passenger boost at Air France KLM
Air France plane
Air France KLM has protected itself from higher fuel costs
Airline group Air France KLM has said its annual profits for 2005/06 should be "significantly above" last year, as it reported rising passenger numbers.

Unveiling first-quarter results, the airline said it had also been helped by hedging against higher fuel prices.

For the three months to 30 June, Air France KLM made a net profit of 112m euros (77m; $141m).

Shares in the firm - which was formed by the merger of Air France and KLM in May 2004 - closed up 2.5% on the news.

No comparative net profit figure is available for the same period last year due to the recent changes in international accounting rules.

We can see the tangible results of their efforts to control costs and this allowed them to raise their forecasts
Airlines analyst Yan Derocles

However, first-quarter operating profit increased by 27% compared with the same period a year ago.

'Robust levels'

Air France KLM's passenger numbers rose by 6.5% during the first quarter.

Fuel costs increased by 200m euros to 809m euros, but the group was able to claw back 18% of the total thanks to its hedging contracts.

"Given the robustness of both activity levels and unit revenues, the results for the second quarter should see a marked improvement," said Air France KLM.

"The quality of the fuel hedging contracts in place will absorb a significant part of the impact on the charges of the current rise in oil prices."

Although Air France and KLM joined in May 2004, both airlines have kept their individual brand names, and their customer-facing operations remain separate entities.

"The results are quite good," said airline analyst Yan Derocles of Oddo Securities.

"We can see the tangible results of their efforts to control costs and this allowed them to raise their forecasts."

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