Air France-KLM Group announced its first annual operating profit since 2010, beating analyst estimates as fuel costs fell and terrorist attacks in Paris failed to hold back fourth-quarter earnings. It said a pay deal with pilots is still crucial to remain competitive when the oil price rises again. Shares of Europe’s biggest carrier rose the most in five months after it posted earnings before interest and tax of 816 million euros ($908 million) for 2015, compared with a year-earlier loss of 129 million euros. Analysts had predicted a figure of 706 million euros, the average of 10 estimates. The company’s main Air France arm is struggling to secure a permanent reduction in staff expenses after efforts to push through a deal last year led to violent protests. Chief Executive Officer Alexandre de Juniac says that without an accord it will be impossible to compete with discount carriers such as EasyJet Plc in Europe and fast-growing Gulf rivals on long-haul routes. “In spite of the favorable environment created by lower fuel prices, we will not reduce our ambition to improve our competitive position while economic and geopolitical uncertainties remain high,” the CEO said on a conference call. Shares of Air France rose as much as 7.3 percent to 7.99 euros, the most since Sept. 3, before trading 6.3 percent higher at 7.92 euros as of 8.12 a.m. in Paris. The stock has added 12 percent this year.

Costs Pared

The fuel bill fell 22 percent on a like-for-like basis compared with 2014, when earnings were also held back by strikes involving cockpit crew that cost it 330 million euros The company reported an operating profit of 150 million euros in the final quarter, beating estimates, despite losing about 120 million euros in revenue after the terror attacks. Unit costs were reduced by 0.6 percent in 2015, in line with November guidance, which while below the initial target of 1 to 1.3 percent still indicates progress, said Yan Derocles, an analyst at Oddo Securities in Paris. “The results show that in a year of transition they managed to cut unit costs and were able to exercise financial discipline and capacity control,” he said. Air France-KLM said it expects another operating profit in 2016, without providing a specific target, guidance Derocles said was ‘vague.” The impact of fuel savings will be “significantly offset” by negative currency impacts and downward pressure on unit revenue, a measure of fares, as other airlines add seats, it said.

Union Talks

The CEO said he’ll continue to seek a reduction of between 0.8 percent and 1.2 percent in 2016 unit costs, together with a 1.5 percent average reduction in the 2016 to 2018 period, pushed back from 2015-2017. Management aims to revive employee talks in coming months, with pilots yet to sign off on final terms for savings agreed under the old Transform plan that expired last year, let alone the Perform 2020 strategy that De Juniac says is key to the company’s future. The CEO has pledged that in the absence of a breakthrough he’ll pare jobs, planes and weaker routes to shrink the airline to a size where it can be sustainably profitable. He has already announced a reduction of 1,000 posts after the failure of earlier talks.