U.S. markets close in 5 hours 32 minutes

Air France warns of job cuts after stand-off with pilots

Air France-KLM Chief Executive Officer Alexandre de Juniac attends a news conference in Paris, France, July 24, 2015. REUTERS/Charles Platiau

By Pascale Denis

PARIS (Reuters) - Air France was drawing up plans for thousands of new job cuts and bracing for fresh labor conflict on Friday after a deadline passed for getting an agreement with pilots on proposed productivity improvements.

Chief Executive Alexandre de Juniac warned of "significant" job cuts as the French arm of the Franco-Dutch airline Air France KLM met to discuss a "Plan B" to restructuring proposals that have been backed by the rest of its 64,000 staff.

A union source said de Juniac had told the board the airline was prepared to cut 2,900 jobs as a result of the failure to reach a deal with pilots over its "Perform 2020" plan, the latest in a series of belt-tightening moves sparked by rising competition.

It had set a Sept. 30 deadline to reach agreement on the plan, first unveiled a year ago and recently beefed up by more cost reductions and an investment review.

Air France-KLM had already said on Thursday it would cut back its operations in the next two years in order to "guarantee a long-term future" as the stand-off with pilots continued.

The cuts equate to 4.9 percent of the workforce of Air France or 3.1 percent of the entire Franco-Dutch group, formed from a merger of Air France and KLM in 2004.

Les Echos newspaper said the so-called "attrition" proposals, or Plan B, also called for deferring delivery of four out of the 13 new Boeing 787 Dreamliners it has on order.

Shares in Air France-KLM rose 2.4 percent, outpacing a firmer European market.


The stand-off is the latest blow-up in long-standing tensions between management and pilots, who staged a 15-day strike last year that cost Europe's second-largest network carrier 500 million euros.

Air France, like other traditional carriers, faces intense competition from low-cost rivals on regional routes and from Middle East airlines such as Emirates for long-haul passengers.

De Juniac was due on Friday to discuss the deadlock with Economy Minister Emmanuel Macron as France's Socialist government sought to defuse the row, while calling on pilots to reopen negotiations.

Prime Minister Manuel Valls on Thursday had urged pilots to "make an effort" to reach a deal.

Philippe Evain, head of the main SNPL Air France pilots' union, said it was ready to make new proposals to management.

"Yes we are ready to make new proposals. We are always open to discussions," he told Reuters.

Evain would not say if fresh talks could take place over the weekend and ahead of a workers' committee meeting on Monday.

A spokeswoman for the airline said no new talks were scheduled.

Meanwhile three French trade unions - the CGT, FO and UNSA - have called on Air France ground staff to hold a strike on Oct. 5 to protest against possible job cuts.

(Additional reporting by Dominique Vidalon, Julien Ponthus, Tim Hepher and Gilles Guillaume; Editing by Andrew Callus, Greg Mahlich)