Air France-KLM discussing commercial pact with Etihad

Air France-KLM Group, which this weekend announced its operating loss had risen nearly 50 percent to US$785m, is in talks about a commercial pact with Abu Dhabi-based Etihad Airways, an executive at Europe’s biggest airline told Bloomberg News.

Talks about a commercial pact with Abu Dhabi-based Etihad Airways are continuing, Air France-KLM Group’s chief financial officer Philippe Calavia said in a conference call, Bloomberg reported.

However, Bloomberg said reaching a final agreement would be tough and there’s no prospect of a deal within weeks.

Etihad Airways, which recently bought stakes in Ireland’s Aer Lingus, Air Seychelles, Air Berlin, was not immediately available for comment.

Air France-KLM Group said its first- quarter loss widened as fuel costs and a drop in freight volumes wiped out benefits from gains in passenger traffic, increasing pressure to secure cost cuts from unions by a June deadline.

The operating loss widened to €597m (US$785m) from €403m a year earlier, the carrier said in a statement. That’s bigger than the €510m loss predicted by analysts in a Bloomberg survey.

“It’s worse than expected,” said Frank Skodzik, an analyst at Commerzbank in Frankfurt. “The deviation is mainly coming from a very weak performance in cargo, while the passenger business benefited from tight control of capacity and a better- than-expected rise in prices.” Skodzik rates the stock “add.”

With the annual fuel bill expected to increase by €1.1bn and the first-half loss likely to widen from last year’s €548m, talks with unions on delivering €2bn of cost cuts announced in January are critical to the turnaround, the Paris-based company said.

“In this context, the group is highly focused on the negotiations under way, the successful outcome of which will enable it to significantly improve its economic efficiency between now and 2014,” it said in the statement.

Deutsche Lufthansa, Europe’s second biggest airline, has gained 4.5 percent this year and International Consolidated Airlines Group, the number three, is up almost 20 percent.

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