Air France, one of the world's largest airlines, announced Thursday that it plans to lay off more than 5,000 employees, approximately 10 percent of its workforce, by the end of next year to return to profitability.
The partially-state owned Air France is sure to give newly-elected French President Francois Hollande political grief this week after the airline announced it was laying off 5,122 jobs out of its 49,301 workforce, according to a press release.
In the media release, Air France said it expected attrition to produce 1,712 of the cuts and then it would plan to cut 2,056 ground staff, 904 cabin crew and 212 pilots over the course of the next 18 months.
Parts of its restructuring efforts include a cut of $2.5 billion in costs, make the airline break-even by 2014 and accomplish a 20 percent increase in productivity. In the first quarter, Air France-KLM Group reported a $749 million operating loss and $7.1 billion in revenues. The parent company currently maintains a net debt of roughly $7.5 billion.
What may seem as a way to appease both the new Socialist government and the unions, the airline said it would encourage employees to retire or transition to part-time work and it would offer job-sharing arrangements to cock pit crew and pilots.
“Air France is facing a fundamental choice about its future. Our business plan has two ambitions: to ensure Air France returns to profitability and to better serve our customers. If we all make the necessary equitably distributed efforts, there will be no forced departures,” said Alexandre de Juniac, Chairman and CEO of Air France, in a release.
“The signature of the agreements in the next few days will involve all Air France staff and will illustrate everyone’s determination to put Air France back on the road to recovery. I have every faith in the success of our plan, which will enable Air France to return to the forefront of the major international airlines.”
On the news of the job cuts, shares rose close to eight percent Thursday and it closed the trading session up 5.5 percent. Air France-KLM shares, which have been down 13 percent for the first six months of the year, were the biggest gainers on the French SBF120.
According to data from brokerage house Liberum Capital (via the Wall Street Journal), Air France flew relatively fewer passengers per member of staff in the first quarter. The figures show the airline flew 743 passengers per staff member compared to 872 at Deutsche Lufthansa and 910 at International Consolidated Airlines Group.
President Hollande and his government are planning to introduce new rules that would make it quite difficult for companies to fire employees. Labour Minister Michael Sapin told France Info Radio earlier this month that the government’s goal is to “make layoffs so expensive for companies that it's not worth it.”