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France warns Air France-KLM against forced job cuts after state bailout

Europe's 2nd-biggest airline is preparing to unveil a workforce plan in coming weeks as part of a strategic review ordered by CEO Ben Smith.

FRANCE is warning flag carrier Air France-KLM against making forced job cuts, with Finance Minister Bruno Le Maire saying such a move would constitute a "red line" the carrier shouldn't cross after receiving a state bailout.

"We spent money to save Air France," he said on Thursday in a radio interview. "I am asking that there not be any forced departures - that's the red line." Mr Le Maire declined to confirm a Bloomberg News report on Wednesday that the airline is seeking about 8,300 voluntary staff departures at its French arm, including pilots, cabin crew and ground staff.

"I hope it's less than 8,000 jobs," he said on France Inter radio. "The state will back a company that becomes profitable and is solid."

Europe's second-biggest airline is preparing to unveil a workforce plan in coming weeks as part of a strategic review ordered by chief executive officer Ben Smith.

Any cuts will add to thousands of jobs on the line in the sector in Europe. British Airways created a political firestorm with moves to scrap 12,000 posts, while Deutsche Lufthansa AG may have 22,000 surplus staff as it shrinks operations.

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Air France-KLM received 7 billion euros (S$11 billion) from France and its Dutch arm is poised to get up to 4 billion euros more from the Netherlands. The French unit, which employs 46,000 people, agreed to a 40 per cent cut in domestic capacity by the end of next year and a lowering of carbon emissions.

The cuts could include around 300 pilots, 2,000 cabin crew and 6,000 ground staff, or roughly 17 per cent of employees, according to people familiar with the matter. The company has declined to comment.

Mr Le Maire's comments show that Mr Smith is under pressure to avoid enforced dismissals, a move the CEO has already said he doesn't want to make. Yet the government appears to be giving the company some wiggle room to make voluntary cuts in a bid to make the carrier competitive.

"I have always had the same line, on Air France and Renault and other companies, when orders collapse, air travel dries up, to put money in and then say we have to absolutely keep every job would lead to risks of bankruptcy," Mr Le Maire said on Thursday. "If Air France goes bankrupt tomorrow, the 7 billion euros goes up in smoke."

Junior Transport Minister Jean-Baptiste Djebbari said on Wednesday that the domestic revamp can be achieved "without social suffering" and may include voluntary departures.

French carmaker Renault SA, which also accepted help, has been at the centre of a storm over moves for similar cuts and a revamp of its domestic industrial sites.

The carrier's KLM arm has already put in place a voluntary departure plan, Mr Smith said last month. He indicated then that a "similar project" was under discussion at Air France and would also encourage staff to move to Paris from the provinces.

Still, the French division lost 200 million euros in 2019 and Mr Smith has warned that a voluntary plan may not be enough to turn round a brand he says needs an "accelerated overhaul" to meet tougher environmental targets and reach break-even next year. Plans are expected to include an expansion of discount arm Transavia and a phasing out of domestic Hop! routes. BLOOMBERG

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