Air France's KLM cuts winter flights as sales under pressure

[TOULOUSE] Air France-KLM Group's Dutch arm said it will cut frequencies across a range of routes for the coming winter season as revenue comes under pressure.

KLM, based at Amsterdam's Schiphol hub, will rein in growth during the Oct 25 to March 26 period by paring flights to 10 European destinations as well as locations in Africa, Japan and Brazil, removing 500,000 seats from the network.

"KLM has introduced a broad range of initiatives to improve its competitive position," the airline said in a statement on Thursday, adding that "speed is of the essence."

KLM is also accelerating the implementation of its Perform 2020 savings program as it continues talks to secure more competitive labor accords with employees.

The curtailed growth plan parallels developments at sister airline Air France, which faces productivity challenges of an even greater magnitude.

Goodbody Stockbrokers said in a client note that the KLM cuts amount to a 2.8 per cent reduction compared with previous plans, according to Innovata data, leaving overall seat capacity at the carrier flat when compared with last winter.

Fleet Cuts Air France-KLM is struggling to return to profit after four years of loss, and last month announced plans to cut some destinations and reassess the number of aircraft deliveries. The company's shares were trading 0.6 percent lower at 6.25 euros as of 9:26 am in Paris, where it is based.

Air France itself has cut more than 7,500 jobs over three years as it faces mounting competition from low-cost carriers such as EasyJet Plc on one flank and Gulf carriers including Dubai-based Emirates on long-haul routes.

A previous group savings plan was deemed insufficient to restore profitability, prompting Chief Executive Officer Alexandre de Juniac to seek additional measures through 2020.

KLM said it has reached new labor agreements with cabin crew and ground crew unions and is continuing to negotiate with pilots, who it said have yet to agree to "much-needed" productivity improvements.

Air France said earlier it has started legal proceedings against its own pilot union, SNPL AF Alpa, over a lack of progress in carrying out an agreement on cost savings.

BLOOMBERG