Air France-KLM narrowed its full-year loss, beating analyst estimates, after a capacity freeze boosted average fares and the airline reduced its headcount by 3,300 over the year.
The Paris-based company had an operating loss of €300 million in 2012, compared with €353 million a year earlier, it said in a statement.
Analysts had predicted a loss of €331 million, based on the average of 14 estimates compiled by Bloomberg.
Air France-KLM chief executive officer Jean-Cyril Spinetta is eliminating 5,000 posts at the company's French arm and 1,300 more at the smaller Dutch unit.
Capacity rose just 0.6 per cent in the year, helping to lift unit revenue, a measure reflecting fares, by 5.9 per cent.
Air France-KLM chief financial officer Philippe Calavia said "The economic backdrop in 2012 was mediocre, but capacity was well managed, nicely contained, and it's thanks to that that we managed to increase unit revenues,” adding that "the context is too uncertain" to make predictions about earnings for 2013.
Shares rose as much as 3.1 per cent and were trading 0.9 per cent higher at €8.40 in early morning trade in Paris. The stock has advanced 21 per cent this year, valuing the company at €2.53 billion.
Air France-KLM had an annual net loss of €1.19 billion from €809 million a year earlier after fuel costs rose by €890 million to €7.44 billion and the company booked €471 million of restructuring costs.
Net debt was cut by €500 million to €6 billion in the year and unit costs fell 0.9 per cent in the fourth quarter at constant rates.
Capacity restraint will continue, with the company planning to increase seating by no more than 1.5 per cent, it said.
Air France-KLM is seeking to fend off the likes of EasyJet in the European short-haul market while competing with British Airways and Deutsche Lufthansa and Gulf rivals including Dubai-based Emirates on long-haul routes.
Bloomberg