Air France - KLM (AFRAF.PK) on Thursday said it plans to cut 5,120 jobs at the French flag carrier as the loss making Franco-Dutch airline is trying to cut costs and net debts to return to profitability. While updating its 'Transform 2015' industrial and strategic plan, the company warned that forced departures would become unavoidable if the employees fail to sign the new agreements, which are currently under negotiations.
Delivering a report on the company's industrial and strategic plan, notably on the over-staffing situation, to the Central Works Council, Air France unit's Chairman and Chief Executive Alexandre de Juniac said the move is part of its objective of improving economic efficiency by 20 percent by the end of 2014.
The company said the plan and new agreements currently being negotiated will lead to a reduction of 5,120 posts at Société Air France by December 2013. This is out of a total of 49,300 employees currently under French contract.
Of this, natural attrition over the period would be 1,710, while the remaining 3,410 would be over-staffing that covers all categories of employees.
Air France said the related procedures will exclude any recourse to forced departures between now and the end of 2013, assuming the new agreements are signed.
In this year and next year, the company will take accompanying measures such as incentives for early and voluntary retirement, incentives focused on the transfer to part-time working as well as work-sharing measures for cockpit and cabin crew.
The company expects the current talks with unions to lead to a collective labor agreement framework supporting these objectives. These agreements will be submitted for signature at the beginning of July.
Further, the company noted that it could avoid recourse to forced departures in 2014 if progress is in line with objectives while conducting an evaluation of the plan in the second half of 2013.
Air France's industrial and strategic plan is part of Air France - KLM's three year transformation plan announced in January aimed at restoring profitability and reducing net debt by two billion euros to some 4.5 billion euros.
The company plans to restrict capacity to about 5 percent, reduce investment to below 5 billion euros, and to freeze general pay rises in the French unit. The new cost cutting measures would total about one billion euros over three years.
Air France - KLM has been reporting losses in the past few quarters as increase in passenger traffic and revenue was insufficient to offset the rise in fuel bill.
For the first half of this year, the company continues to project operating result below the level of last year's loss of 548 million euros, while the second half should see the benefits of the first 'Transform 2015' measures.
Air France - KLM shares are currently trading at 3.69 euros, up 0.25 euros or 7.41 percent in Paris.
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