brunos

Apparently the new CEO must make further cuts and improve productivity, but without any firing.
http://www.latribune.fr/entreprises-...dentielle.html
Nothing concrete in the article (in French) except that the restructuring plan should take place in June 2012. In the meanwhile further cost-cutting in the coming months. The good news is that the CEO wishes to raise the premium service to Asian standards. But how to do it with an airline that is bleeding cash and staff who want to work less and less is a mystery?

hugolover

Ah great, good luck with that. So if they're not going to reduce staffing costs, one of their biggest costs apart from fuel, then presumably passengers will suffer in some way by cutting a service back. Then the effect will be fewer pax.

It seems they already have started cuts in maintenance? Hello Xiamen.

bodory

Maybe they think they will be able to buy new P and J seats with the current Bon Cadeau promotion

31dany

Bleeding cash indeed... AF needed serious cash infusion these last few years and I'm sure this will stop soon...

Mokshu

"Some people say" the objective is to reduce 30% of salary costs begining June til 2013.

brunos

The net worth ("capitaux propres") of AFKL went down by €680 million in semester up to 31 Sep 2011. That is also AFKL "résultat global". Leverage ratio went up from 0.84 to 1.05.
In the previous year (ending 31 Mar 2011) AFKL had a profit, but that is solely explained by a 1 billion capital gain on the partial sale of part of its stake in Amadeus, including the reevaluation of its remaining stake.
It seems reasonable to assume that the losses for the second semester will also be significant. Other airlines are reporting poor results. AA just entered in Chapter 11 reorganization. They could not negociate a "good" (for AA) with their employees and will get it through Chapter 11. So an overall loss of 1.2 billion in equity value is not out of the question for the full year.
The 30% cut mentioned by Mokshu would yield approximately 1.1 billion (probably more if they also negociate with service providers). So the order of magnitude is not unreasonable.

San Gottardo

Something tells me that their "restructuring" will actually not lead to new structures and to new ways of doing things but simply chop off capacities (in terms of resources, investments, product scope) of existing structures and products. But I guess given that they have missed to do a fundamental restructuring in the proper sense of the term for many many years and that now their financial performance is more like a financial abyss they won't have the managerial calm and serenity that would be needed to do things in an intelligent way. Thus the only option left is to do it the quick-and-easy(-and-stupid) way and just show numbers that have an immediate impact. The markets will give them credit for showing a short term impact on numbers rather than for something that lays the foundation for longer term sustainably strong performance.

It's a bit like the Eurozone: some countries have not done the reforms that they needed to do, now that we are in deep stress there's no more time left to get the fundamentals right so "stupid" improvised firefighting is the only possibility, including the breaking of taboos.

Mokshu

Regarding IT systems, AF/KL won't launch new projets in 2012, and enhancements/maintenance budgets are reduced of 30-40%. So don't expect your average bugs on OLCI to be fixed in 2012 ;-)

San Gottardo

I know how AF fixes this issue: just send people their BP by email. They get assigned a seat, no more need to do OLCI

nicolas75

As I wrote it before, The question is less "where to go to?" than "how to go there?"
The point is then to what extent Juniac will find margins of maneuver to implement his strategic plan. Crisis is more a resource than a constraint in this context.

brunos

I agree on all your points. However, there are still different options on where to try to go. One option (that seems to have been in place by PHG) is a semi-LCC (SH) and low-quality (LH), with a focus on attracting/retaining corporate clients by low prices and French networking. Of course, the marketing blabla was different, but not credible.
Does Juniac truly wants to reposition AF in the premium market by moving towards Asian airlines quality? If so, I am happy and steps in that direction are welcome. But how to go there is a challenge that seems daunting. You are quite right that the crisis is an opportunity. But AF has drifted so far away in terms of hard and soft product that the required investment, financially and culturally, seems impossible. Maybe it is more of typical AF marketing blabla. But I am delighted to give Juniac the benefit of hope.

Mokshu

Air France is currently studying the possibility of freezing salaries for 2012, according to La Tribune

Source: http://www.latribune.fr/depeches/reu...n-janvier.html

af fp

It looks like Alexandre de Juniac is very close to the Sarkozy Government; since he seems to have gotten the job for this reason, do you think his tenure will last beyond May 2012 in case the Government changes?

I am saying this because there is a big corruption scandal going on (articles in Mediapart and Le Monde) which involves Thierry Gaubert, a politician who seems to have used money from unknown origin (possibly kickbacks from sales of military equipment to Afghanistan) to build a very big house in Colombia, where Juniac has staid, with a few other French "VIPs". He also invested in random local businesses, such as two bars with the sweet names of "Le Nichon" (slang for "the boob") and "Le Nibar" (slang for... "the boob") and also a chicken business... To top it all there is talking (no proof yet) of some prostitute activity at both the house and bars... Apart from the fact that we hope they flew AF to Colombia (is there a La Premiere service to Bogota?), I wonder how beneficial it is for AFKL to be headed by a character who already brings along such controversy?

San Gottardo

There's no La Première to Colombia. Maybe they rented a private plane.

Mokshu

That's the problem with AF. It's supposed to be a private company, but yet Government is always snooping on it and imposing decisions.

What we know for sure is that no job cuts will be announced before May 2012 (Presidential election in France).