Air France-KLM’s quarterly core profit beat expectations on Friday, as the airline company reported favourable demand recovery despite lower capacity and inflationary pressure on costs.

The Franco-Dutch group posted operating income of 1.02 billion euros ($1.02 billion) in the third quarter, against an average estimate from analysts polled by the company at 844 million. Quarterly revenue came in 8.11 billion euros, above 2019 levels.

“While the situation remains unsatisfactory in some key airports, notably impacting KLM at its Amsterdam Schiphol hub, we saw significant improvements following the operational challenges that had erupted earlier this year,” Chief Executive Officer Ben Smith said in a statement.

Since April, airlines across Europe have been facing staff shortages and labour disputes as cabin crews and pilots demand better working conditions and higher wages to offset inflation.

Airlines were forced to cut thousands of flights from their schedules and limit ticket sales for the coming winter.

These disruptions resulted in 60 million euros additional compensation costs compared to the same quarter in 2019, Air France-KLM said.

The company, whose activities include cargo, aeronautics and maintenance, said the yield environment should remain healthy in the winter season with a solid demand in line with the capacity.

Third-quarter traffic and passenger numbers for Transavia, the group’s low-cost subsidiary, increased by 45.4% and 41.8%, driven by demand recovery in North Africa and Europe, despite record-high eurozone inflation.

Air France-KLM expects seat capacity levels in the fourth quarter, full-year 2022 and the first quarter of 2023 at about 85%, 80% and 90%, respectively, confident that the recovery context will continue.

Competitor German Lufthansa (LHAG.DE) said this quarter it “left (the) pandemic behind” and gave an upbeat forecast for air travel, expecting steady demand with high average yields, as holidaymakers splash out on tickets.