Air France restructures its long-haul operations

Air France said it will restructure long- haul operations and drop about 10 aircraft from the fleet if negotiations with unions fail to deliver productivity gains.

Capacity on inter-continental routes would be cut by 10 percent over two years, resulting in an unspecified number of job cuts, Frederic Gagey, who heads the Paris-based unit of Air France-KLM Group, said Friday on a conference call.

Management continues to favor a deal reducing costs over network cuts, Gagey said, warning unions that the latter option would take the company down a route followed by rival carriers that shrank operations to execute a turnaround.

“This is a collective game – we need to find a way to carry out our targets,” he said. “There’s another way, which is not the preferred one, that consists of cutting our long-haul activities. This is a solution that some companies, like British Airways in the early 2000s, carried out by severely adjusting its capacity, and more recently Iberia.”

Gagey said talks with ground staff are progressing faster than those with pilots and cabin crew. While lower oil prices should keep the airline within the range of its financial forecasts, operating costs aren’t falling as fast as planned.

Cuts in long-haul activities could compromise the introduction of the latest Boeing Co. 787 Dreamliner widebody jets, he said, without elaborating.

Air France said in March it would start discussions with employee representatives on a new productivity drive to help meet the challenge of low-cost carriers on short-haul routes and Gulf rivals in the long-haul market.

Dubbed Perform, the savings campaign was due to start this summer and run through 2020, following on from the Transform program, which had some success in trimming costs and debt. It got off to a poor start when unions refused to attend the first meeting, and Air France said in June that routes could be cut and aircraft deliveries deferred without signs of progress.

Group CEO Alexandre de Juniac has said that if savings are agreed no major job cuts are planned after 9,000 posts went in the past few years.

While the Air France unit lost money in 2014, it would have posted a profit without an extended strike by pilots over attempts to build up separate low-cost operations.

British Airways and Spain’s Iberia, owned by International Consolidated Airlines Group SA, are both profitable. (Bloomberg)