Major European carrier Air-France-KLM plunged into crisis, survival in jeopardy

Major European carrier Air-France-KLM plunged into crisis, survival in jeopardy
Continuing strikes at Air France-KLM and the resignation of its CEO Jean-Marc Janaillac have plunged the company into crisis, prompting the French government to warn about its very survival.

On Monday, Air France shares suffered their biggest one-day fall in a decade – down by almost 15 percent – following the CEO’s announcement he would quit in mid-May after tens of thousands of staff and pilots voted against a multi-year pay offer. The company’s shares are down almost 50 percent since the start of the year.

French Finance Minister Bruno Le Maire told BFM TV that the labor dispute “threatens the survival of Air France.” He added the government would not provide the carrier with a bailout, explaining “the state is not there to pay off the company’s debts”. Janaillac was trying to cut costs at the carrier to keep up with competition from budget airlines and Gulf rivals but ran into strong union resistance.

The company’s management had offered employees a seven percent wage increase over four years, including a two percent rise in 2018. However, the staff rejected that offer, while unions urged for a 5.1 percent wage increase in the first year. “Our demands are far from astronomical,” said Yannick Floc'h, vice-president of the SNPL pilots union, adding: “I think we can find a way out.”

Air France-KLM reported a first quarter operating loss of €118 million ($141 million) last week. It attributed €75 million ($90 million) of that loss to the impact of the strike. Two weeks of strikes by staff have already cost the company €300 million ($357 million), it said.

A Franco-Dutch airline, Air France is the world's 17th largest in terms of passenger trips, according to the International Air Transport Association. In 2004, it bought KLM Royal Dutch Airlines, becoming thus one of the biggest airlines in Europe.

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