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BusinessAir France launches cost hunt to reduce the impact of the coronavirus

Air France launches cost hunt to reduce the impact of the coronavirus

The company Air France will take new measures of the economy, going from the reduction of expenses to the freezing of certain hirings, to counter the negative effects of the epidemic of coronavirus on its financial trajectory, according to an internal letter obtained Wednesday evening.

The impact on traffic of the Covid-19 epidemic “has increased sharply since last week, with cancellations not only to China and Asia but also to all destinations in our network,” writes in this letter dated Wednesday the chief financial officer of Air France Steven Zaat, as indicated by Les Echos in their Thursday edition.

In particular, “many of our + Business + and + Large Accounts + customers are indeed taking measures which aim to limit, or even prohibit, the travel of their employees. The consequences of these measures will necessarily affect our financial trajectory and could put us in a situation of difficult cash flow if we don’t react immediately, “Zaat continues.

In this context, the financial manager calls on managers to tighten so-called “discretionary” expenses such as travel, receptions and invitations, the use of consultants or even seminars. He also asked for a continuation of the hiring freeze for “all services which are not directly linked to our operations”.

According to Les Echos, the KLM company sent a similar communication to its employees, signed by the hand of CFO Erik Swelheim, announcing “a hiring freeze, an incentive to take holidays during the downturn in business and a round of screw-on expenses for all administrative services “.

– Expenses “at the minimum level” –

Certain promotion and marketing campaigns of Air France are also postponed while all departments are invited to reduce their operating expenses “to the minimum level by guaranteeing the safety of our operations””, added Mr. Zaat, hammering that “only strictly necessary expenses will be authorized “.

In addition, “we will quickly review all of the IT and real estate investments planned for the coming period,” he wrote in the letter.

Questioned by AFP, a union source recognizes the fears linked to “flight cancellations.

Management anticipates that revenues will drop sharply in the current quarter, but these anticipation measures may be a bit drastic. The epidemic is a dream pretext to justify the continuity of the hiring freeze on the ground, “said this source.

Contacted by AFP, Air France only declared that it was “already engaged in a plan to improve its competitiveness and reduce costs” and that it “is studying all the measures to limit the impact of Covid-19 on its results “”.

– Lufthansa is also concerned –

These measures echo those implemented by the German company Lufthansa, which announced on Wednesday a hiring freeze and offers of unpaid leave to its employees to “face the economic effects of the coronavirus” as the epidemic continues to progress.

Lufthansa notably canceled until March 28 its 54 weekly connections between Germany, Switzerland, and Austria on one side and mainland China on the other.

The virus has now landed in Latin America, hitherto spared, entering it through Brazil, while continuing to spread in Europe and Asia, stoking anxiety around the world.

When its annual results were published on February 20, the Air France-KLM group announced net profit down 31% for 2019, weighed down by fuel and air freight. He estimated that the impact of the Covid-19 on operating profit would be 150 to 200 million euros, “on the assumption of a gradual resumption of operations from April”. 

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Qamar Munawer
Qamar Munawer
Associate Editor at The Eastern Herald.

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