Turbulent market forces Air France to cut 2,600 more jobs

Air France-KLM will announce on Wednesday that it plans to cut at least another 2,600 jobs, an admission that weaker-than-expected revenues this year have left the airline struggling to meet savings targets.

The restructuring affects the group’s French operations, which employ more than 69,000 people. Alongside the planned job cuts, are proposals to phase out its costly fleet of Boeing 747 aircraft by 2016 and a review of its provincial bases in southern and western France, according to people familiar with the talks.

The fresh cost-cutting measures come as low growth in Europe and high fuel prices have left the airline with more to do on top of its existing savings plan, called Transform 2015, which was outlined in 2011 with a plan to cut 5,100 jobs.

The last set of quarterly results revealed revenues that were below target, with Alexandre de Juniac, the new chief executive, adding that the turnround in its medium-haul and cargo businesses was taking longer than expected.

Frédéric Gagey, chief executive of the French unit, will detail the case for voluntary redundancies and route closures in the short-haul, medium-haul and cargo businesses on Wednesday.

Yan Derocles, analyst at Oddo Securities, said that the network losses were worse than many rivals. “They have to launch this new voluntary departure plan and they have to speed up a little on the wider group restructuring,” he said.

Air France-KLM, with more than 100,000 staff overall, is not the only European legacy airline struggling to put itself on a competitive footing with lower-cost challengers, such as Ryanair and easyJet.

International Airlines Group, for example, has proposed plans to cut 22 per cent of the workforce at Iberia while SAS, the Scandinavian airline, has warned that it could go bust unless unions agree to staff pay cuts of up to 15 per cent.

Air France established bases in Marseille, Nice and Toulouse less than a year ago, offering lower-cost domestic flights as part of a plan to lift its struggling short-haul operations.

But under Mr de Juniac, who has only been chief executive of the merged Air France-KLM group since July, these operations will be reviewed, with final decisions to be taken over the next two weeks and announced on October 4.

The airline said previously that “major” measures would include voluntary redundancies as well as “industrial and commercial decisions”.

Jean-Cyril Spinetta, the former chief executive of Air France-KLM, adopted the Transform 2015 programme aimed at cutting debt and returning the airline to profit after a net loss of €809m in 2011.

Patrick Jousseaume, analyst at Société Générale, said the cost of the restructuring – with employees leaving though voluntary redundancies and natural turnover – would be about €250m. The first phase cost about €350m.

Shares in the group fell slightly on Tuesday. They are up 57 per cent over the past 12 months at €7.13.

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