Airline Air France-KLM had a ‘challenging’ first quarter, with high fuel prices and strong competition hitting both units and the European airline market in general, the company said on Friday.

The combined group booked an operating loss of €303m, of which €256m was down to Air France. The airline said oversupply in the market had led to pressure on pricing and that this had hit both transatlantic and European routes.

Nevertheless, passenger numbers rose 3% to 22.7 million, although the seat occupancy rate fell slightly. The airline’s first quarter fuel bill also rose by €140m to €1.2bn.

Budget airline Transavia booked capacity growth of over 11% following the launch of several new routes, but its overall operating loss mounted to €71m.

New chief executive Ben Smith said there had been improvements in unit costs and an improved operational performance at Air France.

‘This, together with a more benign industry supply outlook for the summer, lead us to expect improving trends in the rest of the year and to confirm our full-year guidance,’ Smith said.