Air France Shares Drop Sharply As Strikes Continue

08 May, 2018, 01:37 | Author: Chad Mckenzie
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On Friday, Jean-Marc Janaillac, chief executive of parent company Air France-KLM, resigned after staff rejected a final pay offer from him, which would have raised wages by 7% over four years.

British Airways and Lufthansa have already undergone heavy cost-cutting in recent years, amid rising competition from low-priced airlines and carriers from the Gulf states.

The outgoing CEO has the backing of the French government as President Emmanuel Macron tries to overhaul his country's economy by liberalising labour laws.

The offer was open until 4 May, but did not receive the number of signatures required for it to be implemented.

Air France shares in tailspin after CEO quits
Air France shares in tailspin after CEO quits

Intermittent strikes in recent weeks have prompted the cancellation of a quarter of flights on average.

Air France staff are striking on May 7and 8 as a stale-mate over pay continues.

"The company is making every effort to minimise the inconvenience they could cause to its customers".

"The future looks turbulent for the company", said Gregoire Laverne, fund manager at Roche Brune Asset Management, who sold his Air France-KLM shares in September 2017.

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The 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.

France's finance minister, Bruno Le Maire, told CNN affiliate BFMTV on Sunday that the labor dispute "threatens the survival of Air France".

He also oversaw the launch of Joon, a low cost subsidiary of Air France, and growth in its maintenance business.

Air France said 15 per cent of its flights would be cancelled on Monday as pilots and cabin crew went on strike over the pay dispute for a 14th day since February.

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The announcement of Janaillac's departure came as Air France-KLM released its first-quarter earnings, which showed a net loss of 269 million euros ($322 million), weighed down by three days of strikes which cost about 25 million euros per day according to the company.

"KLM might (rightfully) ask why the profits are being generated in the Netherlands but the losses being made in France", they said. "I am not taking the money of the French and putting it in a company that isn't at the required competitive level".

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.

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