Over 5,000 jobs to go in Air France cutbacks

AIR FRANCE announced more than 5,000 job losses under a cost-cutting plan yesterday, creating a political headache for new president François Hollande.

The cuts at the French flag carrier, part of the loss-making Air France-KLM Group, come as the world’s airline industry grapples with limited growth prospects, rising costs and fallout from the euro zone debt crisis.

But Mr Hollande’s Socialist government, in place since last month, has pledged to counter rising unemployment by making it prohibitively expensive for companies to lay off workers.

To try to minimise the impact of the job cuts on a workforce of 70,000, partially state-owned Air France promised to avoid forced layoffs, encouraging early retirement, voluntary departures, part-time working and work-sharing. But it said forced redundancies would be unavoidable if unions refused to support managements plans.

The job losses will be made by the end of next year.

“Air France is facing a fundamental choice about its future,” chief executive Alexandre de Juniac said in a statement as he met the airline’s works council. “If we all make the necessary equitably distributed efforts, there will be no forced departures.”

Shares in Air France-KLM, previously down 13 per cent this year after a plunge of over 70 per cent last year, rose as much as 7.9 per cent on the news. They closed the day up 5.5 per cent higher, the biggest gainer on the broad French SBF120 index.

Air France-KLM and Europe’s other older carriers have been confronting losses in short-haul operations as the continents economy has taken a battering.

The Franco-Dutch group unveiled a three-year plan in January to reduce debt and operating costs by €2 billion in an effort to break even in 2014.

Air France-KLM, which has a combined 103,000 workers, says labour contracts stop it heading off competition from low-cost carriers, including Britain’s easyJet.

Meanwhile, airlines expect any benefit from falling oil prices to be wiped out by Europe’s worsening economic prospects.Air France-KLM’s German rival Lufthansa announced 3,500 administrative job cuts around the world last month. – (Reuters)