Air France Union Says Airline Outlines 10% Job-Cut Plan

Air France-KLM Group (AF), Europe’s largest carrier, plans to eliminate more than 5,000 jobs from its French workforce as it seeks a return to profitability.

The cuts, equivalent to 10 percent of posts at the Air France unit, will be achieved through voluntary departures and attrition, with the Paris-based company seeking to avoid firings, it said today in a statement.

Jean-Cyril Spinetta, recalled as chief executive officer last year after a profit drop forced the exit of Pierre-Henri Gourgeon, said in January he’s seeking a deal to deliver more than 2 billion euros ($2.5 billion) in annual savings that he reckons are needed to secure the long-term future.

“Air France is facing a fundamental choice about its future,” Alexandre de Juniac, CEO of the Air France division, said in today’s statement. “Our business plan has two ambitions: to ensure Air France returns to profitability, and to better serve our customers. If we all make the necessary equitably distributed efforts, there will be no forced departures.”

Survivor

Air France-KLM shares closed 5.5 percent higher at 3.63 euros in Paris. The stock has declined 8.7 percent this year, valuing the company at 1.09 billion euros.

“Air France remains a high-risk stock as the market doesn’t stand still and the environment remains uncertain, but I’m absolutely sure that it’s going to be one of the big airline companies that will survive,” said Stephen Furlong, an analyst at Davy Holdings in Dublin who rates the stock “underperform.”

Some 5,122 posts are to be cut in total by the end of 2013, the company told works council and union representatives at a meeting today near its main Paris Charles de Gaulle hub.

Of that number, 3,410 will go through voluntary departures, with the balance, 1,712, to be eliminated by not replacing personnel who retire, it said.

“The problem will only be behind them when the agreement has been signed by all unions representing the pilots, cabin crew and ground crew,” Pierre Boucheny, a Kepler Capital Markets analyst in Paris, told Bloomberg Television. “Then they’ll need to re-focus to what is more profitable, the business class.”

Compulsory Cuts

De Juniac said he aims to have the agreements signed during coming days. Labor officials may formally accept the proposals at a works council at the end of July, CFDT union official Michel Salomon said by telephone after the briefing.

Should workers reject the plan, current labor accords would be compromised, resulting in forced departures, Air France said.

In tandem with slashing jobs, Air France is also revamping its airline operations to help boost their competitiveness.

Regional operators Brit Air, Regional and Airlinair, which serve smaller cities, will become a single unit, while a leisure arm will be established around discount division Transavia and Air France’s short-haul brand will introduce a no-frills class, the company said May 24.

Separately, Air France may be considering the sale of a stake in Servair, the world’s third-largest inflight caterer, three people with knowledge of the situation said June 19. It could also seek investors for its other regional unit, CityJet, French website latribune.fr reported.

Most voluntary departures are being sought among ground staff, with 2,056 earmarked to leave, Air France said, to be joined by 904 cabin crew and 450 pilots. Including attrition, 3,022 out of a total of 32,121 ground workers will go, plus 1,506 of 13,226 flight attendants and 594 out of 3,954 pilots, the CFDT’s Salomon said, citing figures from the company.

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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