Employee-related concerns continue to trouble France's leading carrier Air France-KLM SAAFLYY . As per a recent Bloomberg report, management at the company has been recently in talks with the union representatives over the retrenchment of 2,900 workers. This proposal has launched a series of protests.
Since 1993, Air France has avoided outright firing of employees and has instead followed voluntary retirement schemes to cut jobs. However, after failed talks with pilots last week, Air France executives announced that 300 cockpit crew, 900 flight attendants and 1,700 ground staff could be dismissed soon. Over the last three years, the company has cut back 9,000 positions.
Air France is struggling to brave global competition for short as well as long flights from cheap European and Middle East carriers. Moreover, budget European airlines like Ryanair Holdings plc RYAAY and Norwegian Air Shuttle continue to gain customers owing to low fares and expanded networks, posing serious threat to large carriers like Air France and Deutsche Lufthansa Aktiengesellschaft DLAKY .
Air France ended its second-quarter 2015 with €4.6 billion of net debts while employee salary related costs stood at €1.96 billion, up 2.6% year over year. Meanwhile, the loss figure widened from the year-earlier quarter to €70 million. Thus, to counter such negatives, the company plans to slash unit costs in the range of 1% to 3% and also reduce debts. Moreover, immediate deployment of cost-saving measures coupled with of the adoption of cost-reduction techniques will benefit the company.
At the end of the second quarter of 2015, Air France reported a 3%year-over-year increase in revenues while load factor inched up 0.2%. Moreover, unit revenue per Available Seat Kilometer and unit revenue per Revenue Passenger Kilometer rose on an annual basis of 2.2% and 1.9%, respectively.
As a part of its cost-cutting goals, Air France is planning to shut down five long-haul networks and dispose 14 of its larger, long distance aircraft.
In Mar 2015, pilots of Lufthansa went on a four-day strike following the fallout of talks with management over early retirement benefits. Furthermore, the carrier's plan to expand low-cost offerings has also come under attack from the pilots.
As per a Bloomberg report, U.S. airline giant Delta Air Lines DAL intends to trim its "office workforce" across the globe in an attempt to boost productivity. The retrenchment will apparently affect management and salaried employees.
Employee-related problems continue to haunt the overall airline industry. It has not only hurt the airline profitability but also disrupted flight services. Moreover, falling crude oil prices have encouraged employees to bargain for higher wages.
Meanwhile, the ongoing dispute with pilots has already resulted in massive flight cancellations for Air France. However, implementation of aggressive strategies has improved results in the second quarter of 2015.
Air France currently carries a Zacks Rank #3 (Hold).
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