Air France-KLM reported better than expected annual results on Thursday, citing reduced costs and a strong fourth quarter performance while its Dutch unit flagged ongoing pressures on profitability.

European airlines experienced strong demand in 2024 but struggled to shake off the impact of labour strikes, high inflation and maintenance costs.

The group warned in November that its costs in 2024 might be higher than expected, primarily due to higher staff and maintenance costs at Dutch carrier KLM.

In the fourth quarter, Air France-KLM reported an operating profit of 396 million euros ($427.28 million), nearly double the 205 million euros expected by analysts polled by LSEG, driven by increased passenger numbers and cost containment efforts.

"In the fourth quarter of 2024, Air France-KLM delivered a particularly strong finish, concluding a year shaped by both operational and external challenges," Chief Executive Ben Smith said in a statement.

However, Dutch unit KLM on Thursday deemed its annual performance "disappointing" and warned cost pressures continued.

KLM's operating results decreased by 234 million euros to 416 million euros in 2024, with an operating margin of 3.3%.

"We are still not operating at 100% of our flight capacity and costs continue to rise sharply. As a result, we run the risk of not earning enough to keep investing in our future," KLM CEO Marjan Rintel said.

Rintel said that current margin levels would not allow to finance new aircraft.

Air France-KLM reported a 6.4% fall in full-year operating profit to 1.6 billion euros ($1.73 billion), above the 1.35 billion euros ($1.46 billion) expected by analysts polled by LSEG. ($1 = 0.9268 euros)

(Reporting by Joanna Plucinska, Alban Kacher and Anna Peverieri; Editing by Jamie Freed and Tomasz Janowski)