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Air France-KLM Ready For More Network Cuts If Recovery Lags

By Dave Simpson

Air France-KLM is ready to cut capacity by more than the previously announced 20% if the coronavirus recovery falls short of expectations, its chief executive Ben Smith has said.

Smith was speaking to analysts after the Franco-Dutch airline group posted a €1.55 billion second-quarter operating loss and outlined a cautious ramp-up of services for the remaining summer months.

"The Air France-KLM group will reduce its global capacity by a minimum of 20% in 2021 compared to 2019 levels," Smith told analysts. "We'll continue to evaluate if further adjustments are required."

Job Cuts

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Air France-KLM, which has received €10.4 billion in bailout loans backed by the French and Dutch governments, is cutting jobs at its two main carriers while sticking to ambitious fleet-replacement plans.

KLM has announced 1,500 more layoffs, weeks after Air France moved to reduce its headcount by 7,580.

IAG Capital Increase And Threatened Recovery

Shares in Air France-KLM fell 1.9% amid a European sector-wide decline led by IAG, which was down by 7.1% after the Aer Lingus parent said that it is moving ahead with a €2.75 billion capital increase.

The beginnings of a European recovery from the COVID-19 pandemic now appear threatened by new localised outbreaks and restrictions.

Paying back aid during a sluggish recovery from aviation's worst crisis "will prove a monumental challenge for the group", said Bernstein analyst Daniel Roeska, who questioned whether investment and labour cuts went far enough.

Air France-KLM finance executives "will have a busy decade", Roeska predicted, "refinancing the state-backed loans, selling the silverware [and] possibly going for several equity raises".

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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