October 8, 2018 / 8:31 AM / 11 days ago

UPDATE 1-Air France KLM September passenger traffic rose 2.7 pct from last year

* 9.1 mln passengers in September, up 2.7 pct from last year

* Load factor edges up to 88.6 pct

* But new CEO Smith still faces challenges (Adds share price reaction and fund manager comment)

By Sudip Kar-Gupta

PARIS, Oct 8 (Reuters) - Air France KLM reported on Monday a rise in passenger traffic in September, with the airline aiming to improve its business performance after strikes earlier this year cost it millions of euros and led to a management shake-up.

Air France KLM said it carried a total of 9.1 million passengers last month across the group’s various airline brands, up 2.7 percent from a year ago.

Its load factor - a measure of how full an airline’s planes are - increased 0.2 percentage points to 88.6 percent.

Canadian Benjamin Smith took over as Air France KLM’s new group chief executive last month. Smith faces the task of having to overcome union resistance to shrink the French unit’s swollen cost base while keeping increasingly frustrated Dutch staff on side.

Shares in Air France KLM were down 0.5 percent at 8.40 euros, with the stock having fallen around 40 percent so far in 2018, mainly due to the impact of those strikes.

“At first sight, the numbers look uninspiring, but decent,” said Pierre Willot, fund manager at Paris-based firm Montaigne Capital, which has a small holding in Air France KLM.

“The bright spot is Transavia, with fairly solid numbers. This low-cost subsidiary now represents 1.7 million passengers for the month compared to 9.1 million for the AF-KLM group in September. This is definitely one of the assets that could help Air France to become structurally profitable,” he added.

Strikes this spring cost the group some 350 million euros ($403 million) and led to the departure of Smith’s predecessor.

The French state has a 14 percent stake in Air France KLM, while Delta Airlines and China Eastern Airlines each hold an 8.8 percent stake in the group.

$1 = 0.8680 euros Reporting by Sudip Kar-Gupta; editing by Emelia Sithole-Matarise and Louise Heavens

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