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Air France-KLM sees lower profit on over-capacity, weak cargo

Air France-KLM on Tuesday slashed its earnings forecast for 2014, hit by over-capacity in traditionally lucrative long-haul routes and persistently weak cargo demand.

PARIS: Air France-KLM on Tuesday slashed its earnings forecast for 2014, hit by over-capacity in traditionally lucrative long-haul routes and persistently weak cargo demand.

Europe's second biggest airline after Lufthansa said earnings before tax, depreciation and amortisation for the full year would now reach around 2.2 billion and 2.3 billion euros ($3.0 billion and $3.1 billion), rather than 2.5 billion euros previously forecasted.

In its monthly traffic update, the airline said passenger numbers rose by 2.9 per cent in June, but yields did not keep pace as intense competition held ticket prices down.

"While not representing a turning point in market trends, the June traffic figures published today as well as bookings for July and August nevertheless reflect the over-capacity on certain long-haul routes, notably North America and Asia, with the attendant impact on yields," the airline said in a statement.

Cargo traffic meanwhile fell by 4.3 per cent in June, as the airline highlighted "persistently weak demand".

The airline said Venezuela's failure to release payments added to its decision to cut its profit target.

Venezuela's strict exchange rate controls require airlines to sell tickets in bolivars which the government promises to reimburse in dollars at a pre-determined rate.

But Caracas's failure to repay airlines in time has forced many to cut back or suspend their services.

Air France-KLM said Venezuelan routes were extremely lucrative before the debt issue.

Some "$290 million in revenues are held there" pending a deal with the government, the airline said.

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