Paris warns Air France′s survival in the balance | Business| Economy and finance news from a German perspective | DW | 07.05.2018
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Paris warns Air France's survival in the balance

The French government has raised the pressure on Air France managers and unions, saying the state won't come to the carrier’s rescue as it grapples with worker strikes and a leadership vacuum.

France's finance minister has warned that the survival of strike-hit Air France was in the balance following the departure of the company's chief executive over a pay dispute.

"I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes," Bruno Le Maire told the BFM news channel on Sunday. "Be responsible. The survival of Air France is in the balance," he added.

Le Maire also warned that the state — which owns 14.3 percent of the group — would not serve as a backstop. "Air France will disappear if it does not make the necessary efforts to be competitive," he said, ruling out any government intervention to cover the company's debts. Air France-KLM reported a net loss of €269 million ($322 million) in the first quarter of the year.

On Monday, the company's shares went into tailspin on the Paris stock exchange on Monday, falling by 13 percent after the French finance minister's statements, and following the resignation of the company's CEO on Friday.

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Strike action

On Monday, unionized staff are set to walk out for the 14th day as they press for a 5.1-percent salary increase this year. Despite the strike, the company said it would be able to maintain 99 percent of long-haul flights, 80 percent of medium-haul and 87 percent of short-haul.

At Air France — which is part of an airline alliance with Dutch carrier KLM — the labor dispute intensified on Friday when staff rejected a pay deal worth seven percent over four years. As a result, group's chief executive (CEO) Jean-Marc Janaillac resigned, raising questions over the airline's capacity to cut costs and reform. Strikes have already cost the company €300 million.

Air France-KLM's board is set to announce an "interim governance solution" on May 15 following Janaillac's departure. The company declined to comment further on what format that would take or how long the transition would last. Delta Airlines and China Eastern both hold 9 percent of Air France-KLM.

Wage gamble

Until new management plans are in place, Air France executives lack a mandate to continue negotiations with unions, prolonging the dispute.

Some worker representatives hit back at Le Maire on Sunday, after he called their demands unjustified.

"Our demands are far from astronomical," Yannick Floc'h, vice-president of the SNPL pilots union, told BFM TV later in the day, adding there was room to find middle ground between the two sides. "I think we can find a way out."

Others, including the more moderate CFDT union, which had urged Air France to back management's pay proposal, warned that "dialogue was blocked" and said the SNPL was too inflexible.

"There's reason enough to be worried," CFDT leader Laurent Berger.

The Air France turmoil has coincided with other strike action in France where rail workers press on with rolling stoppages to protest President Emmanuel Macron's planned overhaul of SNCF, the state-run train operator.

French travelers have faced transport misery since early April, and Le Maire said the drag on economic growth from the strikes stood at around 0.1 percentage points of output as tourism and the transport of raw materials took a hit.

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uhe/aos (AFP, Reuters, dpa)

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