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Air France KLM profit better than expected but fuel costs weigh

Air France KLM profit better than expected but fuel costs weigh
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Mixed news from Air France KLM as it reported its first full year results as a merged entity.

What is now the world’s largest airline in terms of revenues turned in an annual operating profit that was better than had been forecast by analysts. The Franco-Dutch group’s merger last year produced higher savings that it had expected and it benefited from improved levels of passenger traffic. But the companys said its operating result should remain largely flat in 2005/2006. Proof of the success of the merger came in improved sales that were 1.3 billion euros up on last year. Passenger numbers for the total group increased by almost six million. The cautious future earnings forecast was because of high oil prices. Air France KLM said more expensive fuel cost the company 2.65 billion euros in 2004/2005. It is predicting that will rise to 3.37 billion euros in the current year, based on oil prices above 50 dollars a barrel. Last month, the company said it will increase its fuel surcharge on ticket prices by one euro for domestic flights and by eight euros for long-haul flights to absorb some of the effect of higher fuel costs. The airline says it sees savings from merger synergies reaching 280 million euros in the current financial year, that is double its original forecast.