Transform 2015 update: The plan’s continued deployment and additional measures
This morning as planned, Air France management presented an update on Transform 2015 to the Central Works Council.
Air France’s recovery has begun and Transform 2015 is taking effect. In the first half, the implementation of measures led operating income to increase by 100 million euros. However, in 2013, the Air France Group will not achieve its objective of returning to equilibrium.
To ensure the sustainability of the Company and to continue investing for our customers, the return to equilibrium in 2014 is essential. This return to equilibrium requires the deployment of all action plans and the completion of Transform 2015, which requires additional measures to reduce costs and accelerate the recovery of short and medium-haul operations and cargo.
Additional measures to reduce costs across the Company
The number of excess staff has been estimated at 2,800 people for 2014. New Voluntary Departure Plans will be implemented. They will be thoroughly discussed with staff representatives and unions as from 4 October. In addition, Air France will continue its policy of wage moderation in 2014 and a better adaptation of business costs to the seasonality of operations will be required.
Accelerated recovery of short and medium-haul operations and cargo
Concerning short and medium-haul operations, the Air France Group intends to maintain its strong presence on the French market. It has therefore decided to develop the activity of Transavia France on departure from Paris-Orly, to adjust its domestic point-to-point network and provincial bases, to increase seasonal capacity and to reorganize French stations.
• Transavia France, which will operate five additional aircraft as from the summer 2014 season, will expand its offering to new high-potential European destinations on departure from Paris-Orly. In parallel, the Air France’s point-to-point network will be adjusted downwards. Also, the seasonal adjustment of the schedule implemented in 2013 at the provincial bases has been a success and will be continued in 2014.
• For all French stations, a change in production methods is necessary to ensure the Air France Group is in line with market standards, to better handle customers and reduce costs in a sustainable way. This will induce a reorganization of processes and a greater use of outsourcing. The objectives, station by station, will be specified at the Central Works Council meeting on 4 October.
Concerning cargo operations, the contribution of hold cargo remains essential to the long-haul economy. Furthermore, the cargo capacity of holds on passenger aircraft carries an increasing share of global air freight and the global air freight market is permanently in overcapacity. In this context, Air France has decided to refocus its cargo fleet on its two Boeing 777F. The Boeing 747 all-cargo aircraft will leave the fleet in 2015, at the same time as the 747 will leave the passenger fleet.
In addition, cargo operations at Paris-Orly, which have never reached a sufficient size, are currently operating at non-market costs. For this reason, an outsourcing project will be implemented in 2014.
Ambitious development of growth sectors
Growth will continue on long-haul routes and new routes will continue to be launched. In parallel, the renewal of the long-haul fleet will be accelerated with the early retirement of the Boeing 747 by 2015 and the arrival of the Boeing 787 and Airbus 350, respectively in 2017 and 2018.
At Paris-Charles de Gaulle, a new “Future hub” plan is being set up to enhance the hub’s attractiveness and competitiveness. It will be based in particular on the development of technological changes in passenger operations, as well as the move upmarket of Air France products and services.
In the engineering and maintenance sector, Air France will continue its development of engine and equipment products with its external customers. This strategy is contributing to Air France’s recovery thanks to lower maintenance costs and a positive contribution to operating income.
“Transform 2015 is taking effect and has had positive results in 2012. Air France is continuing its thorough transformation based on the commercial development of its markets with high growth potential, the move upmarket of its products and services and the reduction of its costs. I intend, together with all Air France staff, to concentrate on customer service and the successful recovery of our Company” declared Frédéric Gagey, Chairman and Chief Executive Officer, Air France.
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