Air France-KLM faces crisis as CEO prepares to depart
The stock dropped as much as 14 per cent on Monday, when Europe’s biggest airline was forced to scrap 15 per cent of its flights and said even more would be cancelled Tuesday because of a series of strikes that began in February
Air France-KLM Group is facing its biggest crisis in years as Chief Executive Officer Jean-Marc Janaillac prepares to quit amid a deepening labour conflict that the French government has warned is threatening the carrier’s very survival.
The stock dropped as much as 14 per cent, the most since 2002, on Monday, when Europe’s biggest airline was forced to scrap 15 per cent of its flights and said even more would be cancelled on Tuesday due to a series of strikes that began in February.
Investors dumped shares after Janaillac on Friday unexpectedly lost his high-stakes gamble to bypass unions in a bid to end the crippling walkouts.
The CEO is scheduled to submit his resignation to the board on Wednesday following the rejection by employees of management’s final wage offer.
The carrier, whose shares have dropped 46 per cent this year, has warned the labour showdown will wipe out at least €300 million (US$358 million) in operating profit in 2018.
The departing chief executive had the backing of the French government as President Emmanuel Macron tries to overhaul his country’s economy by liberalising labour laws.
France’s economic minister, Bruno Le Maire, said on Sunday that the Air France workers’ demands were unjustified and urged them to show “responsibility”. Taxpayers won’t bail the company out, he said.
“If it doesn’t make the necessary efforts to be at the same competitive level of Lufthansa and other major airlines, it will disappear,” Le Maire said on BFM TV. “I am not taking the money of the French and putting it in a company that isn’t at the required competitive level.”
Philippe Evain, president of the French SNPL pilot union, told RTL radio Monday he was “shocked” by Le Maire’s comments, adding that “the survival of Air France is not in question”.
The Dutch finance ministry is “keeping an eye on the situation”, spokesman Coen Gelinck said.
That government owns just under 6 per cent in the Dutch unit, KLM, while the French state has about a 12 per cent stake in the combined group.
Janaillac, who has been at his post less than two years, used a more conciliatory approach than his predecessor Alexandre de Juniac, who also battled unions.
Analysts have compared a rejection of management’s pay proposal by workers to “pressing the self destruct button”.
The stock fell as much as 14 per cent, the most since September 30, 2002, and was trading down 9.9 per cent to €7.29 (US$8.70) a share in Paris, giving a market value of €3.1 billion (US$3.7 billion). Air France-KLM is the worst performer on the 26-member Bloomberg World Airlines Index.
While airlines from Deutsche Lufthansa AG to British Airways – and lately even low-cost specialist Ryanair Holdings Plc – have all had their shares of corporate dysfunction brought on by strikes, none has suffered to the extent as Air France.
A simmering conflict exploded into open warfare in late 2015, when two of the airline’s executives were physically assaulted by enraged workers, forcing them to flee and scale an industrial fence, their business suits and shirts ripped to shreds.
“Mr. Janaillac picked a solution to solve a problem that bypassed unions, and we believe that any solution linked to a collective labour agreement should always involve the social partners,” Joost van Doesburg, a spokesman for the Dutch pilots union VNV said.
According to the Dutch newspaper De Telegraaf, Airbus’s former chief operating officer Fabrice Bregier is a candidate to succeed Janaillac. Air France called the report a “rumour”.
Flights by KLM and Hop!, Air France’s regional carrier, will not be affected by the walkout, Air France said, adding that customers with tickets for travel Monday or Tuesday could re-book free of charge.
Travellers should expect last-minute delays and cancellations, the group said.
Monday marked the 14th day of labour action by pilots, cabin crew and ground staff since February.
While the outcome of Janaillac’s wage offer consultation isn’t binding, it will boost the unions’ negotiating position. A majority of labour representatives have to approve any wage deal to take effect.