Air France-KLM expects ticket prices to be positive in the first quarter of this year and will offer more seats on routes to Asia and Latin America to meet demand, although competition from high-speed trains was biting in France.
The Franco-Dutch airline reported on Friday an operating result of 1.488 billion euros ($1.87 billion), up 42 percent but slightly missing the average analyst forecast for 1.53 billion euros in a company compiled consensus.
The group reported a net loss of 274 million euros for 2017 due to a 1.4 billion euro charge linked to a new pension deal for KLM pilots and cabin crew.
Like other major European airlines, the Franco-Dutch carrier benefited from low oil prices and strong travel demand last year, while the collapse of Monarch and Air Berlin has removed some competition from the market.
Air France-KLM is also benefiting from a return of travelers from Asia and Latin America. It plans to increase capacity by 3-4 percent overall on its main passenger network this year.
"We have been helped by the good environment," Chief Financial Officer Frederic Gagey said, adding Air France-KLM's increase in profit was also helped by stable unit costs.
The group had set an initial target early last year to reduce unit costs by 1-1.5 percent, but added caveats to that at its third-quarter results. It said it was aiming for a reduction of 1-1.5 percent this year, excluding the impact of currency, fuel and pension charges.
Gagey said forward-bookings on long-haul flights were up 1 percentage point in February, up 4 percentage points in March, down 1 percentage point in April because of Easter, and up 2 percent for May.
Analysts expect Air France-KLM to come under pressure from rising fuel costs this year, and expansion of low-cost rivals in Paris and Amsterdam. It will also have to negotiate increased pressure on labor costs, with unions having called for a strike on Feb 22 to support demands for a 6 percent pay increase.
Gagey said unit revenues in the domestic market in France had come under pressure from new high-speed train routes to Bordeaux and that the group was closely watching the development of new low-cost players.
"But it seems that launching low-cost long-haul flights without connecting services is challenging," Gagey said, pointing to Norwegian Air Shuttle, which on Thursday reported a bigger than expected loss for the last quarter of 2017.
Traditional rivals and Lufthansa are due to report over the next few weeks.