Air France-KLM is midway through a cost-cutting programme that aims to fast-track what was once the world’s biggest airline back to profit. Chairman and CEO Alexandre de Juniac explains how the plan is working, what the carrier is doing to revamp its premium offering, and addresses the long-running dispute with the Gulf carriers
Barely a few years after its formation, Air France-KLM faced a decisive decision: drastically transform its operations or, as its head Alexandre de Juniac, warned last year, risk dying or becoming a “small regional carrier”.
“Now more than half-way through the three-year “Transform 2015” programme, the boss of what was once the largest airline company in the world by operating revenues is preparing to release a surprise second instalment — news that is likely to send shivers of panic down the spines of the company’s nearly 50,000 employees, given the recent culling of several thousand jobs and deep cost-cutting.
De Juniac has no apologies for enforcing what he says is necessary to save the airline group, but in words intended to inspire workers, he says: “I’ll put on the table what I think is a fair deal to ensure you have a bright future and a future that is brighter than the one you had. That’s the improvements you have to make; you take it or leave it. Let’s be real.”
Air France alone was bleeding €700m ($952.9m) a year when Transform 2015 was announced in 2012. The goal is to increase economic efficiency by 20 percent by the end of 2014, reduce net debt by between €2-4.5bn and raise EBITDA (earnings before interest, taxes, depreciation and amortisation) to at least €2.5bn.
At the centre of the strategy is jobs: the company, which was formed through a voluntary merger of Air France and Royal Dutch Airlines in 2004, originally targeted 5,100 job cuts out of a total workforce of 49,000 in 2012. The majority of the job losses have been assumed by volunteers willing to retire or depart the company, and almost all have come from Air France.
Other savings being negotiated with unions include wage modernisation measures, seasonal roster changes, job sharing and moving some employees to part-time.
But, positively, the strategy also has included launching new routes, mostly in Africa, Asia and Latin America, boosting the long-haul network, growing its profitable engineering and maintenance divisions, improving online bookings to widen the customer base and investing €500m in revamping much of the fleet.
The Transform 2015 programme saw Air France-KLM record an operating profit in 2013 — only its second in six years. However, another net loss highlights the carrier’s work is far from over.
De Juniac says he is preparing to release the second Transform document by the end of the summer, which he dates as 21 September.
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