Air France to cut more costs after €600m losses

Air France-KLM said on Friday it would add a further €300 million ($328.4 million) to a previously announced €1.5-billion cost-cutting programme as it revealed first-half losses of €619 million.

Air France to cut more costs after €600m losses
Air France will have to cut more costs after making €619 million losses.

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.

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On Friday, it said several planes would be withdrawn its fleet to reduce costs and it would delay delivery of new long-haul Airbus A350s by a year to 2019.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

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Air France, Hop! to cut 7,580 jobs

Air France management said Friday it planned to eliminate 7,580 jobs at the airline and its regional unit Hop! by the end of 2022 because of the coronavirus crisis.

Air France, Hop! to cut 7,580 jobs
An Air France plane lands at JFK airport in New York. Image: STAN HONDA / AFP

The carrier wants to get rid of 6,560 positions of the 41,000 at Air France, and 1,020 positions of the 2,420 at Hop!, according to a statement issued after meetings between managers and staff representatives.

“For three months, Air France's activity and turnover have plummeted 95 percent, and at the height of the crisis, the company lost 15 million euros a day,” said the group, which anticipated a “very slow” recovery.

The aviation industry has been hammered by the travel restrictions imposed to contain the virus outbreak, with firms worldwide still uncertain when they will be able to get grounded planes back into the air.

Air France said it wanted to begin a “transformation that rests mainly on changing the model of its domestic activity, reorganising its support functions and pursuing the reduction of its external and internal costs”.

The planned job cuts amount to 16 percent of Air France's staff and 40 percent of those at Hop!

With the focus on short-haul flights, management is counting mainly on the non-replacement of retiring workers or voluntary departures and increasing geographic mobility.

However, unions warn that Air France may resort to layoffs for the first time, if not enough staff agree to leave or move to other locations. 

'Crisis is brutal'

Shaken heavily by the coronavirus crisis, like the entire aviation sector, the Air France group launched a reconstruction plan aiming to reduce its loss-making French network by 40 percent through the end of 2021.

“The crisis is brutal and these measures are on an unprecedented scale,” CEO Anne Rigail conceded in a message to employees, a copy of which AFP obtained. They also include, she said, “salary curbs with a freeze on general and individual increases (outside seniority and promotions) for all in 2021 and 2022,” including executives of Air France.

The airline told AFP earlier this week that: “The lasting drop in activity and the economic context due to the COVID-19 crisis require the acceleration of Air France's transformation.”

Air France-KLM posted a loss of 1.8 billion euros in the first quarter alone, and has warned it could be years before operations return to pre-coronavirus levels.

Air France has been offered seven billion euros in emergency loans from the French state or backed by it, while the Dutch government approved a 3.4 billion euro package of bailout loans for KLM last week.

The group joins a long list of airlines that have announced job cuts in recent weeks.

Lufthansa is to slash 22,000 jobs, British Airways 12,000, Delta Air Lines 10,000 and Qantas 6,000.