Air France to 'disappear?' New strike, new fears

May 8, 2018

 

Air France is in crisis, mired in a series of disruptive strikes that have prompted its CEO to quit and have left French officials warning the carrier could "disappear" without some sort of solution.

 

The latest came Monday, when the carrier was hit by a new strike over pay. The labor action forced the cancellation of about 15% of Air France’s entire schedule and marked the 14th day of worker walkouts so far in 2018, according to The Associated Press.

 

The news agency notes the company “has already cost the company more than 300 million euros ($360 million) in a matter of weeks.”

 

That turmoil – and questions about Air France’s management and survival strategy – sent the airline’s share price down by 13% in early Monday trading, though that had moderated to a 9.7% decline by early afternoon Paris time.

 

On Friday, the broader company of Air France-KLM was rocked by the abrupt resignation of CEO Jean-Marc Janaillac after workers at the Air France unit rejected the company's latest wage proposal. Air France and Dutch carrier KLM merged in 2004, partnering on connections but still operating as stand-alone brands under the Air France-KLM holding company.

 

French Finance Minister Bruno Le Maire on Sunday said the government, which owns 14% of Air France, would not rescue the airline.

 

He urged striking pilots, crew and ground staff to be "responsible" and said "the survival of Air France is at stake."

 

"Air France will disappear if it does not make the necessary efforts to be competitive," he said on BFM television.

 

The strikes have taken a heavier toll on Air France than management and investors expected, and the company last week forecast a "notably" lower income this year compared to 2017.

 

Unions want a 5.1% pay rise this year, arguing that the company is making enough of a profit to meet their demands. They noted that their wages have been frozen since 2011 as the airline cut jobs and restructured.

 

The company argues that the union demands would wipe out hard-earned gains from the restructuring, which was aimed at stemming years of losses and keeping Air France afloat, as well as jeopardize efforts to win back market share from low-cost airlines and big-spending Mideast and Asian carriers.

 

After protracted negotiations, management last week offered a 2% pay rise this year and an additional 5% over 2019-2021.

Employees rejected that offer Friday, prompting the CEO's decision to step down. He called the dispute a "huge waste that can only make our competitors rejoice."

 

The Air France-KLM board asked Janaillac to stay on until May 15 when it will put a transitional leadership in place.

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