Air France Readies Plan for 8,300 Voluntary Job Cuts

Bookmark

(Bloomberg) -- Air France plans to offer about 8,300 staff incentives to leave in a bid to cut costs without stirring a political backlash after receiving a massive state bailout, people familiar with the proposal said.

The Air France-KLM unit will seek the voluntary exit of around 300 pilots, 2,000 cabin crew and 6,000 ground staff, according to the people, who asked not to be named because the plans aren’t public. The cuts could affect roughly 17% of workers, though that may change after union and management talks, they said.

A spokeswoman for the Paris-based company declined to comment.

Europe’s second-biggest airline is preparing to unveil the plan in coming weeks as part of a strategic review ordered by Chief Executive Officer Ben Smith. The cuts will add to thousands of jobs on the line in the sector in Europe. British Airways created a political firestorm with moves to scrap 12,000 posts, while Deutsche Lufthansa AG may have 22,000 surplus staff as it shrinks operations.

The downsizing has also hit the broader industry, with Frankfurt airport owner Fraport AG planning to eliminate as many as 4,000 jobs as it braces for years of fallout from the coronavirus pandemic. CEO Stefan Schulte said negotiations with unions will begin soon for cuts in areas such as ground handling and administration.

TUI AG, Europe’s biggest holiday firm, also announced plans to eliminate about 580 jobs in France, or 60% of the total, as it shutters shops and closes brands there. All told, major European airlines, airports and travel companies have now cut around 90,000 posts.

Air France-KLM is seeking to offload workers after receiving a 7 billion-euro ($7.9 billion) bailout from the French government, including direct loans and state-backed commercial funding. Under terms of the rescue the French airline unit, which employs 46,000 people, agreed to a 40% cut in domestic capacity by the end of next year and a lowering of carbon emissions.

The shares fell 2.5% in Paris trading. The airline’s market capitalization has more than halved since the start of the year to 2 billion euros.

Smith is under pressure to avoid enforced dismissals, with Junior Transport Minister Jean-Baptiste Djebbari saying Wednesday that the domestic revamp can be achieved “without social suffering” and may include voluntary departures. French carmaker Renault SA, which also accepted help, has been at the center of a storm over moves for similar cuts and a revamp of its domestic industrial sites.

The carrier’s KLM arm is in talks about a Dutch bailout of up to 4 billion euros and has already put in place a voluntary departure plan, Smith said last month. He indicated then that a “similar project” was under discussion at Air France and would also encourage staff to move to Paris from the provinces.

Still, the French division lost 200 million euros in 2019 and Smith has warned that a voluntary scheme may not be enough to turn round a brand he says needs an “accelerated overhaul” to meet tougher environmental targets and reach break-even next year. Plans are expected to include an expansion of discount arm Transavia and a phasing out of regional Hop routes.

Lufthansa separately issued a plea to investors Wednesday to turn up and vote for its 9 billion-euro bailout package at a June 25 meeting or risk tipping Europe’s largest airline into insolvency. The carrier said it expects attendance to fall below 50%, meaning two-thirds of votes would need to back the rescue.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.