Julian Moxon/PARIS

Air France must invest at least Fr40 billion ($6 billion) on new aircraft over the next five years if it is to remain competitive, the airline's new president Jean-Cyril Spinetta told a French Senate committee on 20 November.

Aircraft-renewal plans centre on the need to replace Air France's fleet of Boeing 737-200s and 747-200s, because neither type meets Stage 3 noise rules and will incur increasing airport penalty charges.

Spinetta also points to the need for a 40% growth in the airline's long-range fleet and a 15% increase in the number of medium/short-range aircraft. Air France holds a significant number of options on Airbus single-aisle aircraft left over from its merger with Air Inter, and these are still available for conversion to firm orders.

The money will have to be raised internally, Air France having exhausted state aid with its recent Fr20 billion Government recapitalisation. Prospects are improving, however, with profits for 1998 expected to exceed Fr1 billion.

Also, the Government has said that up to 49% of the company will be available to outside investors in any future privatisation, although it intends to maintain a controlling stake. At least part of the proceeds from the privatisation could be used to bolster the balance sheet.

Raising the money for new aircraft will go hand in hand with a renewed emphasis on efficiency and cost control, says Spinetta. This is likely to mean further consolidation of the hub at Paris/ Charles de Gaulle, which has already enabled the carrier to abandon loss-making routes over the past two years while increasing frequencies on profitable routes.

Costs must be cut by a further 10% in the next three years, says Spinetta, half of the savings coming from "fleet rationalisation", and the rest from further reductions in operating costs. Further cuts in the workforce are envisaged, following 5,000 job losses over the past three years.

Source: Flight International