(Bloomberg) -- Air France-KLM said it expects to incur higher costs than it had previously estimated for this year on increased wages as well as increased maintenance costs caused by supply-chain constraints.
The shares slumped as much as 12% in Paris trading, the most in almost two years. The stock has lost about 42% in value this year, more than rivals Deutsche Lufthansa AG and IAG SA, the owner of British Airways that reports earnings on Friday.
The Franco-Dutch carrier group now estimates costs will advance by about 3% compared with last year. That’s one percentage point more than it had predicted at the end of the second quarter, according to a statement on Thursday as the company released earnings. Operating income in the third quarter fell 12% to €1.18 billion ($1.3 billion) amid higher expenses, the group said.
Higher costs for equipment, staff, airport charges as well as delays in aircraft deliveries have crimped the forecasts of several European airlines this year. German rival Lufthansa has also initiated a savings plan that includes phasing out about 50 older long-haul aircraft in the latter part of the decade.
KLM was the main driver of the increase in expenses, with unit costs rising 8.4% at the Dutch arm, the carrier group said. Along with higher wages, KLM was unable to add capacity due to a shortage of pilots and maintenance issues. In addition, Air France-KLM said it also had to contend with supply-chain issues for the maintenance of its aircraft.
Unit costs for the group in the third quarter rose 3.4% and will remain higher than expected in the last three months of the year, the company said. Air France-KLM said the Summer Olympics hosted in Paris cost it about €160 million in passenger revenue as customers stayed away from city during the games.
The carrier group expects demand to continue for both its long- and short-haul operations. Long-distance capacity for the fourth quarter is 77% sold out, while booking load factors at its Transavia low-cost unit are at 68% for the same period, the airline said.
(Updates with details of cost increases in fifth paragraph.)
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