Air France-KLM is to cut more than 5,000 posts in France as part of a €2-billion ($2.5-billion U.S.) cost cutting program, confronting the new Socialist government with the biggest job reduction plan it has faced since it took power last month.
The airline said on Thursday it was seeking agreement with unions to reduce its Air France workforce by 5,122 by the end of next year, a cut of some 10 per cent, through natural attrition, voluntary redundancies and part-time working. But it warned that it would have to resort to compulsory lay-offs if no agreement was reached.
"Air France faces a decisive choice for its future," said Alexandre de Juniac, chief executive of Air France.
Air France-KLM, which reported a net loss last year of €809-million and a worse than expected operating loss of €597-million in the first quarter of this year, is battling high operating costs and a heavy debt burden.
Facing mounting competition from both more efficient traditional rivals and especially low-cost carriers such as Ryanair and easyJet, it has targeted a 20 per cent improvement in productivity by 2015.
The commitment to cut jobs through voluntary departures, if agreed, will reduce the risk of industrial conflict at Air France, which has been plagued by strikes over the years.
But it is also a concession to the government, owner of a 15 per cent stake in Air France-KLM, which is facing a series of potential redundancy programmes by big companies just as unemployment has crept up to 10 per cent of the workforce and the economy has stalled.
The government is planning to legislate against "abusive" redundancies and put in place tighter restrictions on plant closures in a bid to stem the number of potential redundancies threatened in the automobile, steel, telecoms, banking and other industries.
Air France said 1,712 of the total cuts among its 50,000 contracted French workers would be achieved through attrition, with the balance coming from retirement, voluntary departures, part-time working and work-sharing. The majority of departures will be among ground staff.
"If the plan goes as expected, recourse to compulsory departures will also be avoided in 2014," it said.
But it warned that, without agreement with the workforce "non-voluntary departures would not be avoidable".