Air France to Unveil Drastic Cost-Cutting Plan
October 01 2015 - 1:20PM
Dow Jones News
PARIS— The French arm of Franco-Dutch group Air France-KLM plans
to unveil a steep cost-cutting plan, the carrier announced Thursday
after failing to reach an agreement with pilots.
The board of Air France met Thursday and formally instructed
management to come up with new cuts to the carrier's loss-making
operations by Oct. 5. No details were provided on the forthcoming
plan.
The decision came in response to a breakdown in negotiations
with pilots' unions. Talks between the unions and Air France
initially aimed to trim €170 million ($190 million) annually over
the next three years. But pilots refused to fly more hours for the
same pay, casting the demand as an effective pay cut.
The clash underlines the difficulty Europe's legacy airlines
face in making their operations lean and flexible enough to compete
with budget airlines. At the same time, Gulf carriers are eating up
market share on more expensive long-haul travel to Asia.
Despite rising sales, Air France remains in the red this year
because of a weak euro and declining demand in emerging
markets.
For months, the company's chief executive, Alexandre de Juniac,
has been stepping up pressure on the French unions to accept his
five-year plan, dubbed Perform 2020, which calls for deep cost cuts
and an expansion of the budget brand Transavia.
Unless that plan is implemented, Air France will have to slash
loss-making airport connections, leading to significant layoffs,
management warns.
Air France's pilots cost 25% more than those of European
competitors, management says.
So far, pilots have stood their ground. A 14-day pilots strike
in September 2014 cost the company €416 million in lost sales.
Write to Inti Landauro at inti.landauro@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 01, 2015 14:05 ET (18:05 GMT)
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