Air France-KLM: 1Q losses narrow, but needs more cargo restructuring. Will financial targets slip?

Air France-KLM made further progress with its Transform 2015 restructuring programme in 1Q2014 and saw its losses narrow. However, while unit costs fell, unit revenue weakness is a concern and LCC subsidiary Transavia's losses widened. In addition, cargo continues to provide headaches for management and a further restructuring, focusing on the use of freighter aircraft, has been announced.

The first quarter is typically weak for European airlines and underlying trends were blurred by the shift in the timing of Easter, so these results may not tell us much about the group's full year prospects. Air France-KLM is sticking to its financial targets for now.

However, Venezuela's recent currency devaluation, and Air France-KLM's consequent network adjustments, are a reminder that the airline industry is often subject to unexpected developments. Unless there is some contingency in the targets, there is a sense of anxiety that the next change in them will be to lower them.