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AIR FRANCE

Air France names new leaders as airline looks to end costly turbulence

Air France-KLM named new leaders on Tuesday following Jean-Marc Janaillac's sudden exit as the result of a bitter industrial dispute over salaries that has cost the company €300 million.

Air France names new leaders as airline looks to end costly turbulence
Photo: AFP

Air France-KLM named chief financial officer Frederic Gagey as its interim CEO on Tuesday following Jean-Marc Janaillac's sudden exit in a bitter dispute over salaries in the group's French wing.

Former French minister Anne-Marie Couderc was named non-executive chairman  at the French-Dutch group, which has been hit by months of strikes as unions seek a 5.1 percent pay rise at Air France this year.

Gagey, 61, will sit on a new management committee alongside Franck Terner and Pieter Elbers, CEOs of the French and Dutch operations respectively, who will act as his deputies.

But the board indicated that the temporary CEO will not have a mandate to find a way out of a pay dispute which management says has cost at least 300 million euros ($356 million) due to strikes since February.

“Regarding the ongoing labour dispute… the Air France CEO does not have a new mandate to take decisions that would jeopardise the growth strategy approved by the Air France-KLM board of directors,” a statement said. 

Janaillac said Air France was “going through one of the most difficult crises in its history”.

“Repeated crises, strikes, disputes and doubts have divided our group,” he told a shareholders' meeting after officially stepping down Tuesday, saying the strikes had “dented customers' trust and the image” of Air France.

Janaillac gambled his job on calling a vote among Air France staff on whether to accept a seven percent pay rise over four years, saying he would quit if it was rejected.

He announced his resignation on May 4 after 55.44 percent voted against the deal, sending shares in Air France-KLM nosediving.

The board hailed Janaillac's track record, saying he had produced strong results since 2016 which had enabled a “successful turnaround and growth”, and expressed “deep regret” over the strikes. 

“These strikes will also have a negative impact on the group's financial results,” the board said.

Air France-KLM reported a net loss of 269 million euros ($322 million) for the first quarter, weighed down by the strikes.

The crisis has highlighted sharp cultural differences between Air France and KLM, which merged in 2004 to create Europe's biggest airline. 

The group's profits have been drained by the French walkouts, with the first-quarter losses entirely due to Air France which lost 178 million euros compared to KLM's profits of 60 million euros.

'Survival in the balance'

French Economy Minister Bruno Le Maire warned this month that “the survival of Air France is in the balance” as the airline has repeatedly had to cancel 
around a quarter of flights on strike days.

Unions have said the pay rises offered are too little after six years of salary freezes, but management warns that improving company finances are vulnerable to competition from the Gulf and low-cost European carriers.

The board said the interim management structure would be in place “for the shortest-possible period” needed to appoint Janaillac's successor, without 
imposing a specific time limit.

Couderc, a lawyer by training and an Air France board member since 2016, is a onetime protegee of former French president Jacques Chirac who has spent her career between business and politics.

The 58-year-old served as employment minister and then labour minister in the 1990s before going back to the private sector as assistant general manager 
at publishing house Hachette.

She then took charge of French media distribution firm Presstalis, where her experience of lengthy labour disputes may come in handy for the new job at 
Air France.

Couderc launched a restructuring plan at Presstalis in 2012 which slashed the workforce in half, prompting repeated strikes which blocked the distribution of newspapers.

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AIR FRANCE

Air France, Hop! to cut 7,580 jobs

Air France management said Friday it planned to eliminate 7,580 jobs at the airline and its regional unit Hop! by the end of 2022 because of the coronavirus crisis.

Air France, Hop! to cut 7,580 jobs
An Air France plane lands at JFK airport in New York. Image: STAN HONDA / AFP

The carrier wants to get rid of 6,560 positions of the 41,000 at Air France, and 1,020 positions of the 2,420 at Hop!, according to a statement issued after meetings between managers and staff representatives.

“For three months, Air France's activity and turnover have plummeted 95 percent, and at the height of the crisis, the company lost 15 million euros a day,” said the group, which anticipated a “very slow” recovery.

The aviation industry has been hammered by the travel restrictions imposed to contain the virus outbreak, with firms worldwide still uncertain when they will be able to get grounded planes back into the air.

Air France said it wanted to begin a “transformation that rests mainly on changing the model of its domestic activity, reorganising its support functions and pursuing the reduction of its external and internal costs”.

The planned job cuts amount to 16 percent of Air France's staff and 40 percent of those at Hop!

With the focus on short-haul flights, management is counting mainly on the non-replacement of retiring workers or voluntary departures and increasing geographic mobility.

However, unions warn that Air France may resort to layoffs for the first time, if not enough staff agree to leave or move to other locations. 

'Crisis is brutal'

Shaken heavily by the coronavirus crisis, like the entire aviation sector, the Air France group launched a reconstruction plan aiming to reduce its loss-making French network by 40 percent through the end of 2021.

“The crisis is brutal and these measures are on an unprecedented scale,” CEO Anne Rigail conceded in a message to employees, a copy of which AFP obtained. They also include, she said, “salary curbs with a freeze on general and individual increases (outside seniority and promotions) for all in 2021 and 2022,” including executives of Air France.

The airline told AFP earlier this week that: “The lasting drop in activity and the economic context due to the COVID-19 crisis require the acceleration of Air France's transformation.”

Air France-KLM posted a loss of 1.8 billion euros in the first quarter alone, and has warned it could be years before operations return to pre-coronavirus levels.

Air France has been offered seven billion euros in emergency loans from the French state or backed by it, while the Dutch government approved a 3.4 billion euro package of bailout loans for KLM last week.

The group joins a long list of airlines that have announced job cuts in recent weeks.

Lufthansa is to slash 22,000 jobs, British Airways 12,000, Delta Air Lines 10,000 and Qantas 6,000.

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