Air France to Cut 7,500 Jobs With Recovery Seen Years Away

Air France-KLM plans to cut more than 7,500 jobs at its French arm, amid warnings that its future is on the line.

Europe’s second-biggest airline will eliminate 6,560 positions at its Air France flagship, while its regional carrier Hop! will lose 1,020 posts, the company said Friday in a statement. The cuts will take place over the next three years.

In all, the reductions amount to about 17% of the workforce in those units. So-called natural departures, such as retirements and employees who leave on their own, are expected to make up about half the reductions.

The airline said it’s not expecting business to return to last year’s level before 2024. During the worst days of the coronavirus health crisis, revenue fell by 95% and losses topped 15 million euros ($17 million) a day.

Air France-KLM is under pressure to avoid forced departures after getting 10.4 billion euros in French and Dutch funding to ride out the collapse in demand caused by the pandemic. The bailouts come with political strings that will complicate its ability to navigate the crisis, including environmental conditions that will lead to a revamp of French domestic services as the government encourages people to take the train.

“Recovery looks set to be very slow due to the uncertainties regarding the health situation, the lifting of travel restrictions and changing commercial demand,” Air France-KLM said.

The company briefed unions Friday on the measures, part of a strategic review ordered by Chief Executive Officer Ben Smith aimed at securing the company’s future.

“Air France is at the edge of the abyss,” French Junior Economy Minister Agnes Pannier-Runacher said earlier on Sud-Radio, while adding that the carrier must pursue a “responsible” dialog with unions.

The planned job cuts at Air France capped a difficult week for the country’s aerospace industry after planemaker Airbus SE announced 15,000 cuts of its own, including more than two thirds across its main French and German bases.

Both companies should improve their labor plans to avoid forced retrenchments, Pannier-Runacher said. She added that it’s also vital for the carrier to meet commitments on cutting carbon emissions.

Air France lost 200 million euros in 2019 and Smith has said a voluntary program may not be enough to turn round a brand he says needs an “accelerated overhaul” to break-even next year.

Hop! is set to phase out routes within France where the rail alternative takes less than 2 1/2 hours.

Shares of Air France-KLM advanced 1% Friday in Paris, where it is based. They have declined 58% this year, valuing the company at 1.8 billion euros.

Under terms of the state rescue, Air France agreed to a 40% cut in domestic capacity by the end of next year and a halving of carbon emissions on routes in mainland France by the end of 2024, compared with last year. Smith is also expected to expand discount arm Transavia, which has a lower cost base.

The job cuts will add to tens of thousands across Europe. British Airways created a political storm with moves to scrap 12,000 posts announced as it was still taking furlough money, while Deutsche Lufthansa AG has said moves to shrink operations could cost more than 20,000 jobs.