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Air France to cut more costs after €600m losses

Ben McPartland · 24 Jul 2015, 12:55

Published: 24 Jul 2015 12:55 GMT+02:00

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Despite a five-percent increase in passenger revenue for the first half of 2015, income from cargo plummeted 81 percent, the company said.

Tightening competition and the adverse effects of exchange rates also helped drag the airline farther into the red.

As a result, Air France-KLM chairman Alexandre de Juniac said the company would increase its two-year cost- cutting target to €1.8 billion by seeking greater efficiencies and additional closures of unprofitable routes.

"The lack of results improvement leads us to implement immediate additional adaptation measures including, in particular, the closure of heavily loss-making routes, the downward revision in capacity for the forthcoming winter season, together with an acceleration and an increase in the magnitude of our cost-saving initiatives," de Juniac said in a statement.

The airline -- Europe's largest in terms of traffic -- has been struggling to boost profitability and reduce its €5.4 billion of debt.

De Juniac has been urging unions to agree to a five-year "Perform 2020" plan to boost efficiency.

Fearful of job cuts and salary reductions, unions have resisted several points in the programme, especially expansion of its low-cost Transavia airline.

A 14-day strike in 2014 by pilots over planned restructuring around Transvia cost the airline 425 million euros, dragging it to a €198-million loss for the year.

In revealing the continued losses during the first half of 2015, de Juniac appealed to unions to join management to find a way of returning to profit.

"Following the agreement signed by KLM with its unions, the rapid conclusion of the negotiations with the Air France unions is key to re-launching the results turnaround.

"At this pivotal moment in Air France-KLM's history, the board and I know that we can count on the spirit of responsibility and commitment shared by all the group's staff to enable us to return to a growth path," he said.

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The airline in June had already announced closure of four unprofitable routes, and said 1,000 jobs had been eliminated since the start of the year.

On Friday, it said several planes would be withdrawn its fleet to reduce costs and it would delay delivery of new long-haul Airbus A350s by a year to 2019.

Should negotiations with unions fail to adopt "Perform 2020", de Juniac noted, further consequences would be in store for the airline's long-haul activity.

Ben McPartland (ben.mcpartland@thelocal.com)

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