Cash-strapped airline Air France-KLM on Thursday
unveiled plans to slash costs by over 2 billion euros ($2.5 billion) over the coming three years, by shrinking its fleet,
suspending planned investments and freezing wages.
In a statement, Air France-KLM said its board of directors had decided on Wednesday that, "given the uncertain economic environment and the ongoing imbalance between transport supply and demand," the group would increase capacity by only a little over 5 per cent between 2012 and 2014.
This will lead to a shrinkage of the European group's fleet and a reduction in its investment programme "from over 6 billion euros over the period 2009-11 to below 5 billion euros for the coming three years."
Air France would do that by deferring delivery of some aircraft and not exercising options it had on others.
The company further aimed to reduce its net debt by 2 billion euros to around 4.5 billion euros by the end of 2014.
One billion euros in cost cutting measures would be implemented "immediately," including a general freeze on pay increases in 2012 and 2013 at Air France, a policy of "wage moderation" at KLM and the continuation of a hiring freeze.
A "transformation plan, encompassing all its businesses," would aim to generate another billion euros in "free cash flow" over three years.
The passenger business, particularly the short- and medium-haul business, would be the main focus of the savings, Air France said. The short- and medium-haul business is estimated to have lost 700 million euros in 2011.
Air France said it might have to outsource more activities, among other measures.
French trade unions said they were prepared to negotiate with the group in order to save jobs.
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