International Air Transport Association

Air France to Cut 2,000 Jobs After EU505 Million Loss

- Air France-KLM Group, Europe’s biggest airline, said it will eliminate as many as 2,000 jobs after lower ticket revenues and dwindling cargo volumes pushed it to a third-quarter loss.
The cuts at the Air France unit will be achieved by scrapping posts when people leave and no one will be fired, spokesman Nicolas Petteau said today. The company had a 505 million-euro ($653 million) net loss in the three months ended Dec. 31 versus a year-earlier profit of 139 million euros.
Air France joins British Airways Plc, Ryanair Holdings Plc and Virgin Atlantic Airways Ltd. in slashing jobs this week as the industry is buffeted by crumbling demand for air travel. The Paris-based company will also cut 1.2 billion euros from capital spending and reduce capacity by 2 percent as it targets a positive operating profit in fiscal 2009.
“I’m encouraged by the moves they’re making to protect their financial position,” said NCB analyst Neil Glynn, who recommends buying Air France stock. “Airlines globally, the flag carriers in particular, are firefighting to try and weather the current storm.”
Air France rose as much as 7.3 percent to 8.30 euros and was trading at 8.15 euros as of 10:35 a.m. in Paris. The stock has declined 11 percent this year.
“Activity in the third quarter reflected the increasing severity of the economic downturn,” Air France said in a statement. “We will continue to assess all our costs in order to achieve additional savings wherever possible.”

Cargo Collapse
The three-month loss came after cargo traffic declined almost 13 percent and tumbling oil prices compelled the company to reduce fuel surcharges to passengers, hurting ticket revenue.
While passenger traffic increased 3.4 percent in the quarter, it slipped 1.9 percent in January, when the drop in cargo traffic accelerated to 23 percent.
Air France said contracts to fix the cost of fuel purchases had a “negative impact” following the 76 percent drop in crude since July and that it would unwind those positions. The carrier will subsequently be hedged on 43 percent of its energy needs for the 12 months through March 2010, a move that should cut the bill by 300 million euros to 5.5 billion euros, according to NCB’s Glynn.
Airlines globally are shedding jobs and routes to help combat losses that may reach $2.5 billion this year as traffic falls 3 percent, according to the International Air Transport Association.

Virgin, Ryanair Cuts
Richard Branson’s Crawley, England-based Virgin Atlantic said yesterday it may eliminate 600 posts across its business in order to “stay healthy” until economies revive. Ryanair, Europe’s biggest discount airline, said it will cut 200 jobs at its base in Dublin.
British Airways, Europe’s third-largest carrier, has cut more than 400 managers through voluntary severance and said Feb. 6 it will meet with unions to agree further reductions. SAS Group, the owner of Scandinavian Airlines, is making the deepest cuts, eliminating 3,000 jobs as it culls capacity by 20 percent and abandons ambitions to operate as a global carrier after more than a year of losses.
Deutsche Lufthansa AG, Europe’s second-biggest airline, said Feb. 3 that it would “react with necessary measures,” to maintain profit and that its business is “afflicted by higher than usual risks.”

Air France reported a 194 million-euro operating loss for the quarter after disclosing on Jan. 20 that the deficit for the period would be around 200 million euros. Analysts had predicted a loss of 217 million euros.

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