Air France finalises its strategic plan to return to competitiveness and reduce excess staff without

Alexandre de Juniac, Chairman and CEO of Air France, is today presenting Air France's finalized strategic business project to the Central Works Council and the Company's management, its impact on jobs and planned methods of handling excess staff numbers. Air France has a dual ambition: to restore its competitiveness and reposition its products and services at the best possible global level while at the same time developing its leisure offering.

Air France has also made the demanding choice of maintaining the outline of its scope of activity, which implies in order to be viable, given the Company's financial position, a 20% improvement in economic efficiency.

During the various phases to draw up the project, Air France has chosen to work in complete transparency and to privilege social dialogue to find structural and sustainable solutions, included in corporate agreements. At the end of June, Air France will be presenting new framework agreements for signing by the various professional organizations. If they are signed, Air France has pledged not to make redundancies and to implement various measures to support the necessary reduction in staff numbers.

This project is part of the Air France KLM group's recovery plan where both airlines, Air France and KLM, are implementing transformation measures to ensure the Group rapidly returns to breakeven.&nb

Finalizing the strategic business plan

Air France's strategic business project, the first parts of which were presented on 24 May, has five main areas:

1 - Restructure short and medium-haul operations

To regain its competitiveness, the Air France Group's short and medium-haul activity will be restructured around three complementary poles: Air France, a French regional hub and Transavia France.

Air France will continue to develop by feeding its hub at Paris-Charles de Gaulle, its main Business domestic and European routes from Paris-Charles de Gaulle and Paris-Orly, as well as its three regional bases in Marseille, Nice and Toulouse.The grouping together of operations by Airlinair, Brit Air and Regional within a new regional hub will give rise to a 15% cost reduction and will offer customers an adapted and more competitive range of services for Business and leisure travel within France and to the rest of Europe.To capture the growth in the "leisure" sector, Air France has chosen to develop its subsidiary Transavia France which will increase from 2013 the frequency of its existing flights and will operate new routes from Paris-Orly, Lille, Lyon and Nantes. No Air France routes or frequencies will be transferred to Transavia France.

2- Redress and reposition long-haul operations

Air France intends to regain growth momentum by making a difference with the quality of its products and services, especially in First and Business class. As soon as the agreements are signed, a vast investment programme representing several hundred million euros in new cabin facilities will gradually be implemented.

3 - Optimize airport services and their economic efficiency

To improve customer channels at airports, Air France will be increasing the use of new technologies to provide easier and faster passenger channels at new infrastructures such as the S4 boarding satellite at Paris-Charles de Gaulle. Economic efficiency at stations will also be optimized by renegotiating purchasing agreements, streamlining processes and increasing productivity.

4 - Accelerate transformation at the cargo division

The cargo division will continue to accelerate the efforts made over the past three years to reduce costs and improve its economic performance in order to contribute positively to the Company's long-haul operating revenue, while at the same time improving the operations of its cargo fleet, reduced to 4 aircraft. The full integration with KLM Cargo and Martinair will be finalized and new synergies will be explored with regional and international stations.

5 - Develop growth sectors in maintenance and optimize aircraft maintenance

For its maintenance operations, the Group will continue its profitable growth strategy, especially in the growth sectors of "equipment and engines". Industrial reorganization will be implemented to restore the profitability of the "aircraft maintenance" sector.

A necessary reduction in staff numbers without redundancies

The definition of a new framework agreement is a major condition of the company's recovery. Negotiations are underway with all unions representing ground staff, cabin crew and pilots. By the end of 2014, the Company aims to increase economic efficiency by 20% by limiting changes to the payroll and by increasing the efficiency of time worked, by not replacing staff who leave and by improving processes.

The current dynamics of the discussions will provide the Central Works Council with information on June 28 on the draft agreements presented for signing by the trade unions.

Based on the industrial project and under the new framework measures being negotiated, the changes in staff numbers from December 2011 to December 2013 will result in a staff decline of 5,122 jobs out of 49,301 within Air France (French employment contracts). The number of natural departures not replaced during this period is estimated at 1,712. The residual number of excess staff at the end of 2013 is estimated at 3,410, i.e. 6.9% of staff at 31/12/2011, divided between 2,056 ground staff (6.4% of the population concerned), 904 cabin crew (6.8% of the population concerned) and 212 pilots (5.4% of the population concerned, to which can be added excess staff of 238 pilots, already identified at 31/12/2011).

After these agreements are signed, the excess staff measures implemented for 2012-13 will include:

an incentive for voluntary retirement under a voluntary redundancy scheme,an incentive for voluntary departure from the company under a voluntary redundancy plan,targeted incentives to switch to part-time,measures to share working time for cabin and flight deck crew.

In this way, if the agreements are signed, the accompanying measures to reduce staff numbers will exclude the use of forced departures before the end of 2013. An evaluation of the progress of the plan will be made in the second half of 2013. If the Transform plan proceeds as planned, enabling the company to reach the required 20% economic efficiency, the use of forced departures will also be avoided in 2014.

In the event that the agreements are not signed, the procedures in the framework agreements which are currently being denounced would be successfully completed in a much more economically constrained context. Given the impact of the necessary reductions in activity and routes closures, forced departures may therefore not be avoidable.

"Air France is facing a fundamental choice about its future. Our business plan has two ambitions: to ensure Air France returns to profitability and to better serve our customers. If we all make the necessary equitably distributed efforts, there will be no forced departures. The signature of the agreements in the next few days will involve all Air France staff and will illustrate everyone's determination to put Air France back on the road to recovery. I have every faith in the success of our plan, which will enable Air France to return to the forefront of the major international airlines", declared Alexandre de Juniac, Chairman and CEO of Air France.