UPDATE 1-Air France-KLM expands maintenance work into China
* To own mechanical maintenance plant in Xi'an -unions
* To own half of plant in Shanghai via joint venture -unions (Adds airline confirmation, spokesman comment)
PARIS Aug 31 (Reuters) - Air France-KLM plans to expand its growing maintenance business into China to tap the booming Asian aviation market, the Franco-Dutch carrier said on Friday.
The company told workers' representatives on Thursday it would start building two sites during the first quarter of 2013, aiming to open for business in 2014, according to two union sources.
The maintenance division, the group's third-largest by revenue, was the only one to post a profit in the first half of the year.
The airline, formed from a merger of Dutch and French carriers in 2004, plans to cut 5,000 jobs to turn around its short and medium-haul business, which lost roughly 500 million euros ($625 million) in 2011.
Air France-KLM would own a plant in Xi'an specialising in mechanical maintenance and half a plant in Shanghai through a joint venture with a Chinese partner, one source said. The latter would provide maintenance for onboard electrical equipment. The total cost for the plants would be 6 million euros ($7.5 million).
"There was a concern over a shift of the workload to China, but Air France gave guarantees on the matter," the source said, adding that most unions backed the plan at the meeting.
A spokesman for the group confirmed that workers had accepted the plan, but declined to give details.
"It is in no way a case of transferring a business currently based in France," the spokesman said. "If we don't capture this Asian market, others will take it in our place."
He added that the carrier needed to be as close geographically to its customers as possible in order to win contracts.
Air France-KLM's maintenance business had first-half revenue of 1.57 billion euros ($2.0 billion), of which 523 million was with external customers against 495 million a year earlier.
The airline - whose business is caught between low-cost rivals such as easyJet in Europe and Gulf carriers such as Emirates in the premium long-haul market - wants to cut operating costs by 2 billion euros to pay down debt. ($1 = 0.8001 euro) (Reporting by Cyril Altmeyer and Dominique Vidalon; Editing by Erica Billingham)
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