Air France-KLM makes progress in 2015, but still has more to do. Labour productivity is at the heart

Air France-KLM's 2015 was a big improvement on its strike-hit 2014, but it highlighted the progress that it still needs to make. It returned to net profit for the first time in six financial years and achieved its best operating margin since before the global financial crisis, although this was below its previous peak.

In the passenger network business, long haul profits soared and medium haul losses narrowed. LCC brand Transavia made another loss, but laid plans for its first base outside the Netherlands and France, to be established in Munich in Mar-2016. In the cargo segment, losses deteriorated in spite of capacity cuts, especially in its full freighter operation.

Air France-KLM generated a return on capital employed of 8.6% in 2015, a leap from 1.7% in 2014, but short of its 2017 target range of 9% to 11%. As the world airline industry already approaches levels of profitability higher than previous cyclical highs, Air France-KLM will need continued assistance from the global cycle. It will also need a new agreement on labour productivity, particularly with Air France flight crew.