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Air France-KLM eyes job cuts as Covid-19 creates 1.8 billion shortfall

Air France flight crew members wearing protective face masks are seen during a presentation of Air France new security and health measures at Paris Charles de Gaulle airport in Roissy-en-France during the outbreak of the coronavirus disease (COVID-19) in France, May 6, 2020
Air France flight crew members wearing protective face masks are seen during a presentation of Air France new security and health measures at Paris Charles de Gaulle airport in Roissy-en-France during the outbreak of the coronavirus disease (COVID-19) in France, May 6, 2020 REUTERS - BENOIT TESSIER
2 min

Air-France-KLM has reported a net loss of 1.8 billion euros in the first three months of the year, offering an early taste of the impending economic devastation of the coronavirus crisis. The group predicts demand could take "several years" to recover and potential layoffs are on the horizon. 

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The first-quarter result underscores the effect of the coronavirus, which has grounded global travel and forced millions to stay at home.

While the group noted a "strong performance" at the start of the year, there was an “abrupt plunge in revenue that will obviously extend through the second quarter”, Chief Financial Officer Frederic Gagey warned Thursday.

Air France-KLM's net loss widened to 1.8 billion euros in March from 324 million, swollen by a 455 million-euro purchase on fuel that was never used because of the pandemic.

The Franco-Dutch group, which has received 7 billion euros in French-backed rescue aid and Dutch pledges for a further 2 billion to 4 billion, expects to reduce monthly cash burn to 400 million euros in the second quarter thanks to cost-cutting and state-funded furloughs that save 350 million euros a month.

Layoffs on the horizon

But operating losses will widen "significantly" in April-June with 95 percent of flights expected to remain grounded due to travel restrictions and collapsed demand.

Chief Executive Ben Smith is due to open talks with unions in June to discuss potential job cuts and their consequences for staffing, as airlines around the world start the painful process of scaling back their businesses.

Smith told Reuters the company had “already identified” opportunities for voluntary layoffs, but remained vague on the size of likely cutbacks.

Air France-KLM has warned that demand for travel is "not expected to recover to pre-crisis levels before several years."

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