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Air France-KLM CEO cites challenges of 'unprecedented magnitude'

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Air France-KLM Group is facing unprecedented challenges and its two carriers must "stay mobilised" to maintain the company's European leadership, chief executive officer Alexandre de Juniac said.

[TOULOUSE] Air France-KLM Group is facing unprecedented challenges and its two carriers must "stay mobilised" to maintain the company's European leadership, chief executive officer Alexandre de Juniac said.

The Air France-KLM merger in 2004 "was highly beneficial to both airlines and more generally to the Netherlands and France," the board said Monday in an e-mailed statement. It approved the airlines' 2015 budget and reviewed concerns raised by Dutch stakeholders about plans to centralise the carriers' cash management.

The board said unspecified solutions were adopted.

The airline group, Europe's biggest, issued three profit warnings last year. The Air France unit saw its worst pilot strike in 40 years in 2014 and is performing worse financially than its Dutch counterpart.

The board of the joint company after Monday's meeting said it stood behind management plans to undertake measures to boost competitiveness. Air France-KLM and its peers are squeezed between low-cost carriers on short- and medium-haul routes and fast-expanding Middle Eastern carriers on longer routes.

"The entire European air transport industry is currently facing challenges of unprecedented magnitude," Mr de Juniac said in the statement. "Today more than ever before it is essential that Air France and KLM remain mobilised" to remain competitive.

Reports in Dutch newspaper De Telegraaf on Jan 26 said KLM's management and supervisory board opposed plans to have the Dutch carrier's cash centrally managed with that of the French carrier.

On Jan 20 the deputy minister of infrastructure, Wilma Mansveld, said in a letter to Dutch parliament that KLM needed to preserve independence within the holding company.

Air France-KLM is set to report full-year earnings on Feb 19.

On Feb 5, management will meet with the central workers' council and lay out proposed measures to help the company trim costs. The airline told its French unit employees on Jan 22 that it would seek to cut 800 additional jobs from cabin crew and ground staff to help save money.

BLOOMBERG