Air France unveils debt plan

 
City A.M. Reporter
AIR FRANCE-KLM yesterday announced a pay freeze for French staff and cutbacks in its fleet as part of a three-year plan to end financial rot at Europe’s largest airline by revenues.

The belt-tightening, coming in the wake of a series of staff strikes, is the first stage of a politically sensitive turnaround plan expected to be completed after French presidential elections, now 100 days away.

The Franco-Dutch group pledged to cut debt by €2bn by the end of 2014 and said it would shrink its fleet by shedding more than a billion euros from a planned expansion project.

The plan will also involve a combination of immediate and longer-term cost reduction measures, Air France-KLM said in a statement yesterday.

“We needed to take these measures because our debt position and costs per unit were running too high, and because of losses on our domestic and European routes ... We do this to avoid getting into trouble later,” said Peter Hartman, chief executive of KLM, the group’s Dutch subsidiary.

Shares of the group rose over seven percent to a five-week high earlier, ahead of the plan from Jean-Cyril Spinetta, who was restored as chief executive in addition to his chairman role last November, following months of underperformance compared to its rivals.

Unions expressed concerns over the impact on jobs of the restructuring plan, whose measures also include a general pay freeze at Air France during 2012 and 2013 combined with “wage moderation” at the Dutch sister airline KLM.

“We are angry because this is just a cost-cutting plan and we were looking for something more strategic,” said CGT union rep David Ricatte.