LONDON – Air France will lay-off 465 domestic ground staff and reduce by 15% its short-haul capacity. The decision comes following the airline’s new goals to cope with the competitive nature of the transport industry in Europe.
The airline expects to trim its regional network by as much as 15% by 2021, also noting that, from now on, “there will be no forced departures”.
Anne Rigali, CEO of Air France, noted that “many new talented staff – pilots, flight attendants, mechanics, and engineers – will join us in 2019,” trying to calm the waters over the 465 jobs that will be cut from the airline’s payroll.
Rigail said that these decisions “support Air France’s growth,” but keeping in mind that the new management has “the responsibility to guarantee an even balance of our activities in certain sectors to secure their long-term viability.”
“This is the idea behind the project presented for the short-haul sector today. We will conduct the consultation process with our labor groups as part of open and transparent dialogue, and we are committed to supporting all staff who wish to move to a new position or develop their career,” she said.
Why the lay-offs?
The airline conceded that two main things were causing these lay-offs to happen. Firstly, there is the rapid development of low-cost carriers in the region, which has seen “aggressive pricing policies and often with the help of public authorities.”
About 90% of Air France’ staff are based in France, meaning that the majority of airlines growing in the country have “not contributed to developing employment in the regions where they operate, taking advantage of European mobility and basing employees in jurisdictions with lower labor costs,” as noted by Rigail.
The second element comes from its own domestic competitors: high-speed trains. The past five years have seen Air France’s domestic network become affected by high-speed train routes.
The French Government has said that that high-speed train capacity has expanded over the years, and conceded that it “has become Air France’s main rival on the domestic network.”
The trains have also been able to operate freely without taxes or charges that target the air transport industry in France.
Statistics show that the launch of four new high-speed train routes in 2016/17 will attract up to 4.7 million passengers by next year—most of which could easily be deducted from Air France’s forecasted capacity.
The introduction of these new train alternatives translated into an approximate loss of 90% of market share in the domestic front.
However, the airline can still claim it has about 65% market share in France, although this figure may continue to drop at increased rates.
Benjamin Smith, the CEO of Air France-KLM Group, added to Rigali’s comments, reassuring that even though the airline is trimming its domestic presence, “the French domestic network is intricately linked to the history of Air France.”
Smith added that the network “guarantees its regional base, and connects the French regions to the rest of the world by offering several thousand daily connection opportunities.”
“In a highly competitive marketplace, we are all fully engaged in defending a domestic market that is vital for Air France and also more globally for the Air France-KLM Group.”
Air France will surely focus on connecting domestic traffic through its large long-haul network in Paris-CDG, and vice versa, leaving behind the domestic point-to-point traffic that has proven to be less efficient and financially viable.
Weakened Financials Demand New Strategy
Air France’s financials have recently taken a hit through the failings of its domestic network. In 2018, the carrier posted a €189 million loss, compared to a €96 million loss in 2017.
The airline did disclose that since 2013, cumulative losses have been valued to €717 million.
The next two years will now see the airline go through a major reduction of short-haul routes, as well as a fine-tuning in its fleet strategy.
In November 2018, the carrier revealed it is planning to return five of the 10 Airbus A380s to its lessors by the end of 2019, following an audit led by Benjamin Smith.
The results of the audit revealed that the A380 has become too expensive to run, especially when compared to the Boeing 777-300(ER)s that the airline deploys on similar missions.
With these new measures in place, the airline will continue to focus on its long-haul network, fed by a more efficient domestic and intra-European network, aiming to fight the ever-growing low-cost carrier industry that has taken over the European market at unseen levels of speed and growth.