The enormous Franco-Dutch airline AirFrance-KLM posted its 2011 financial results this morning in Europe and the news is bleak, a loss of about $1 billion (or 809 million euros as they put it) driven by a staggering increase in fuel costs. The combination of a 2 percent increase in volumes, a 4 percent negative impact from currency dynamics, and a 13 percent net increase in the price of jet fuel after hedging left them with a 20.1 percent increase in the total fuel bill which wiped out any hope of profits. Shares have been sliding for a while now on speculation that the company may need to issue new shares (thus diluting the value of what existing shareholders already own) in order to raise money.
The passenger airline industry continues to be basically terrible for anyone trying to run a business in a competitive environment loose talk of a war with Iran isn’t going to help on the fuel cost side.
