Air France to Deepen Job Cuts as New Chief Seeks to Stem Decline

Air France-KLM Group (AF) said it wants to cut 2,600 jobs at its French airline unit next year as new Chief Executive Officer Alexandre de Juniac confronts slow economic growth in Europe as well as higher fuel prices.

Europe’s biggest airline, saying last week that it expects to report an operating profit for this year, told its central works council that it would seek the cuts through attrition and early retirements, with a target of implementing the latest set of cuts by the end of 2014, the carrier said today.

Juniac, who took over the top job last month after running the Air France unit for 1 1/2 years, said last week that there remained work to be done to turn around the French unit. The proposed cuts follow savings programs at Deutsche Lufthansa AG (LHA) and IAG SA (IAG)’s Iberia, which have also struggled to adapt to slack demand and passengers’ move to low-cost carriers.

“Within a difficult economic environment, particularly in France and South Europe, the Air France Group needs to implement the measures required to ensure an enduring turnaround in its short- and medium-haul and cargo businesses,” the airline said in the statement.

Juniac put together a cost-savings program last year that already includes more than 5,100 job cuts at the French airline, representing about 10 percent of the total. Those reductions, to be completed by the end of 2013, are also through voluntary departures.

The executive last week said that the so-called Transform 2015 program is on track, though worse-than-projected economic conditions in many parts of the world are making it harder to effect a recovery.

The announcement today is the beginning of process that will involve negotiations with employees. Air France plans to present details to employees in early October, ahead of talks that will conclude in time to begin new cuts by January 2014.

Lufthansa aims to lift operating profit to a record 2.3 billion euros ($3 billion) by 2015 via a plan that calls for 3,500 job cuts. Spain’s booked a 311 million-euro charge for restructuring Iberia in May after pushing through a plan to slash 3,100 posts as it seeks a 600 million-euro earnings rebound by 2015.

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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