June 21, 2012 1:20 pm

Air France-KLM to axe 5,000 jobs

airfrance planes

Air France-KLM is to axe more than 5,000 jobs in France as part of a €2bn cost-cutting programme in what the new Socialist government fears may be only the first of a number of big industrial redundancy plans in the coming months.

The airline said on Thursday that it was seeking agreement with unions to reduce its Air France workforce by 5,122 by the end of next year, a cut of some 10 per cent in its domestic staff, accelerating the pace of a restructuring aimed at putting it back on a competitive footing against rivals with much lower costs.

President François Hollande’s administration, in office for only a month and facing unemployment already at 10 per cent, has set up a special unit in the finance ministry to counter a series of threatened redundancies and plant closures that trade unions say could hit 45,000 jobs, particularly in the auto, steel and telecoms industries.

This week, Arnaud Montebourg, the industry minister, met Philippe Varin, head of PSA Peugeot Citroën, the struggling carmaker, amid union fears that it plans to shutter its Aulnay plant north of Paris, which employs more than 3,000.

The PSA board was forced to issue a statement the next day backing Mr Varin after press reports suggested the controlling family shareholders were unhappy with the company’s performance.

In this fraught climate, Air France-KLM, 16 per cent owned by the French state, said that it planned to achieve its job cuts through natural attrition, voluntary redundancies and part-time working. But it warned that it would have to resort to compulsory job losses if no agreement were reached.

“Air France faces a decisive choice for its future,” said Alexandre de Juniac, chief executive of Air France.

Air France-KLM, which reported an operating loss of €597m in the first quarter of this year, is battling high operating costs and a heavy debt burden. It has targeted a 20 per cent improvement in productivity by 2015. An AT Kearney study showed that Air France’s costs, excluding fuel and landing charges, were 30 per cent higher on average than its competitors, including traditional rivals such as Lufthansa.

The commitment to cut jobs through voluntary departures, if agreed, will reduce the risk of industrial conflict at Air France, which has been plagued by strikes over the years. The airline is also negotiating with unions on pay, working hours and other working conditions to improve efficiency. The government is backing Air France’s voluntary approach, said Michel Sapin, labour minister, adding that “dialogue” would enable the airline “to recover its financial balance”. “The management says if nothing is done this great company risks capsizing,” he said.

The government is considering new aid for the car industry, but its hands are tied by the urgent need to cut the budget deficit. It is planning to legislate against “abusive” job losses and put in place tighter restrictions on plant closures in an attempt to stem the number of potential redundancies.

Air France wants a deal on the job cuts by the beginning of July, although union leaders signalled that they would seek guarantees on remaining jobs before agreeing to the plan.

The airline said that 1,712 of the total cuts among its 50,000 contracted French workers would be achieved through attrition, with the balance coming from retirement, voluntary departures, part-time working and work-sharing. The majority of departures will be among ground staff, although 450 pilot positions will also go.

“If the plan goes as expected, recourse to compulsory departures will also be avoided in 2014,” it said.

But it warned that, without agreement with the workforce “non-voluntary departures would not be avoidable”.

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