PARIS (Dow Jones) - Air France-KLM (3112.FR) Thursday said that high fuel costs caused it to record a loss in its fiscal fourth quarter, but rising passenger traffic and synergies from the merger of the two airline companies helped lift earnings for the full year.

In its first set of annual results since the French and Dutch flag carriers' merged last year, the world's largest airline by revenue posted a net loss of EUR6 million in the January to March quarter, following net profit of EUR42 million a year earlier.

For the full year, net profit rose 20% to EUR351 million, from EUR292 million a year earlier, the company said. Synergies from the merger, either through cost savings or increased revenue, amounted to EUR115 million last year, Air France said, compared to its initial forecast of EUR65 million.

Net profit came in significantly above analysts expectations of EUR306 million. Operating profit before aircraft disposals, up 21% to EUR489 million, also exceeded estimates.

A London-based analyst said that even though results were better than expected, they were "driven by cost-cutting, not revenue." Operating profit outlook for 2006 is "lower than I expected, but this company is always conservative with outlook," he said.

Shares of Air France-KLM closed at EUR13 Wednesday.

In the year just begun, the company said merger synergies would amount to an additional EUR165 million, for a total over the two year period of EUR280 million.

Rising oil prices caused Air France-KLM's fuel bill to jump 22% in the fourth quarter to EUR619 million. For the whole year, its fuel bill surged 33% to EUR2.65 billion.

This year the company forecasts a fuel bill of EUR3.37 billion.

Passenger traffic last year rose 8.9%, while scheduled passenger revenue rose 7.1% to EUR14.1 billion.

That helped lift the joint airline's overall revenue by 7.3% to EUR19.1 billion last year.

This year Air France-KLM's operating profit before aircraft disposals should be "comparable" to the EUR489 million posted last fiscal year, Air France-KLM Chief Operating Officer Pierre-Henri Gourgeon said in meeting with reporters.

Net profit this year should be "substantially" higher due to a capital gain on the airline's sale of a stake in airline reservation company Amadeus. It said Amadeus operation had generated EUR800 million in cash before taxes.

The airline's board will propose a EUR0.15 a share dividend at the next shareholders meeting, up from a EUR0.05 a share dividend last fiscal year.

Gourgeon also said the board had decided Wednesday to order eight Boeing 777- 200 cargo jets to replace existing 747 cargo jets. Five of the orders are firm and three are options, he added. Delivery is expected to begin at the end of 2008.

Company Web site: http://www.airfrance.com

-By Greg Keller, Dow Jones Newswires; +33 1 40 17 17 40; greg.keller@ dowjones.com Dow Jones Newswires 05-19-05 0459ET Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.