IAG and easyJet hit by Air France profit-warning

8th Jul 2014 10:32

IAG and easyJet were among the top decliners on the FTSE 100 on Tuesday morning, down 5% and 3% respectively, after Air France-KLM issued a profit-warning for this year. Despite reporting a 3.9% increase in passenger traffic for the month of June, the French-Dutch airline cut its 2014 target for earnings before interest, taxes, depreciation and amortisation (EBITDA) from around €2.5bn to between €2.2bn and €2.3bn.Air France-KLM noted that this would still be a 20% increase with respect to 2013 and assured investors that it did not represent a turning point in market trends. "Nevertheless, the June traffic figures published today as well as bookings for July and August reflect the over-capacity on certain long-haul routes, notably North America and Asia, with the accompanying impact on yields", the airline said in a press release."This comes on top of the persistently weak cargo demand and the challenging situation in Venezuela identified in the first quarter," Air France added. However, the airline stated that the company's strong capital discipline would allow it to reach its objective of reducing net debt to €4.5bn in 2015.The profit-warning came after German competitor Deutsche Lufthansa (-2.4%) also warned in June on its own profit targets for 2014 and 2015 due to weak passenger revenue and cargo trends. At 11:31 in Paris, Air France-KLM traded down 4.26% to €8.97.JM