Air France-KLM, France major flag carrier, on Thursday unveiled a multi-billion-euro restructuring plan needed to bolster the group's profits by 2014.
In a statement posted on its website, the Franco-Dutch joint venture said it is planning to restore competitiveness through cost-cutting, restructuring the short- and medium-haul operations as well as debt reduction.
"Given the uncertain economic environment and the ongoing imbalance between transport supply and demand... it's necessary to opt for quasi stable capacity for the Air France-KLM group in both passenger and cargo," the group said.
"Consequently, over the next three years (2012-2014), the Group will only increase capacity by a little over 5 percent on a cumulative basis," it added.
In order to meet the target, Air France-KLM planned to reduce its fleet and investment program to "below 5 billion euros (6.41 billion U.S. dollars) for the coming three years" from over 6 billion euros (7.7 billion U.S. dollars) over the 2009-2011 period.
In addition to investment cuts, the flag carrier will also freeze on general pay rises in 2012 and 2013 at Air France, and adopt a policy of wage moderation at KLM as part to squeeze costs.
The Paris-based airline also set "as a key priority the reduction of the group's net debt by 2 billion euros to some 4.5 billion euros (5.77 billion U.S. dollars) by end December 2014."
"These improvements on their own, however, are not sufficient to guarantee the durable restoration of the group's competitive position and financial strength," the group said, stressing the need to implement a transformation plan to help it to garner an additional one billion euro in free cash flow over three years.
