Air France’s new boss flies into immediate strike threat

Air France's new boss flies into immediate strike threat
The first non-French boss of Air France-KLM, Canada's Ben Smith, faces a rocky landing at the strike-prone airline where his nomination and pay packet have been sharply criticised by French trade unions.

Smith, the current number two at Air Canada, was unveiled Thursday as the new chief executive of the Franco-Dutch group, whose last boss quit during an ongoing labour dispute as staff press for higher wages.

The French government, which has a 14.3-percent stake in the airline, said attracting “a leader of this stature who has great experience acquired through 19 years with Air Canada” was “a boon” for the airline.

But no sooner had the 46-year-old been named than he became embroiled in controversy over his salary, which could be several multiples that of his predecessor Jean-Marc Janaillac, according to a source close to the airline.


Photo: AFP

The source told AFP his annual pay could reach up to 4.25 million euros ($4.8 million), consisting of a fixed wage of 900,000 euros — 50 percent higher than his predecessor — as well as performance-based bonuses and shares which will be dependent on results.

Former CEO Jean-Marc Janaillac took home 1.122 million euros in 2017, based on a fixed salary of 600,000 euros and bonuses.

The CFDT union called the reported pay hike “unreasonable”, echoing criticism from other unions, while French politicians across the spectrum were drawn into the debate about executive pay.

Olivier Dartigolles, a spokesman for the French Communist party, said the package was “shameful” and said Smith “would be the person explaining to employees that they need to make moderate salary demands”.

Fears of further strikes from staff, who have seen their call for a five percent pay hike this year turned down by management, saw investors take fright on Friday with shares down heavily on the Paris stock exchange.

'Inconceivable': Air France appoints its first non-French boss Photo: AFP

The fall was due to “fears of a strike forming that would affect the profitability of the airline,” an analyst at financial trading group IG France, Alexandre Baradez, told AFP.

In early afternoon trading, Air France-KLM shares were worth 8.62 euros, down 4.71 percent.

French unions have organised 15 one-day strikes since February to press for higher pay, causing inconvenience for passengers and leading to losses estimated at 335 million euros by the company.

Foreign CEOs the exception

Air France unions have also bristled at the nomination of a foreigner to the job, with nine out of 10 unions issuing a statement Thursday saying it was “inconceivable” that the company “fall into the hands of a foreign executive”.

Smith joins a small, select club of foreign bosses of large French companies.

Of the 40 companies on the CAC 40 index of France's biggest companies, only five have foreign bosses, including plane-maker Airbus, the Axa insurance company and carmaker PSA Peugeot-Citroen.

Writing in the pro-business L'Opinion daily Friday, editor Nicolas Beytout said the unions' anti-foreigner stance was particularly strange to see at an airline “which is by definition global”.

“Benjamin Smith is arriving in hostile territory,” the left-wing Liberation daily wrote Friday, while Le Parisien warned of “turbulence” for the new CEO.

Smith's most pressing task on arrival at the end of September will be to negotiate a new wage agreement to end the pay dispute.

As chief operating officer at Air Canada, he has experience of sensitive labour negotiations, having led talks with pilots' and flight attendants' unions ahead of the launch of low-cost operator Air Canada Rouge.

“I am well aware of the competitive challenges the Air France-KLM Group is currently facing and I am convinced that the airlines' teams have all the strengths to succeed in the global airline market,” he said in a statement after his nomination.

But Air France's unions could pose a stiffer challenger.


Ex-CEO Janaillac resigned in May after gambling his job on getting staff to accept a pay deal that would have seen them earn a 2.0-percent raise this year, and another 5.0 percent between 2019-2021.

The unions defied him, saying workers needed to be rewarded immediately for accepting years of pay freezes now that Air France-KLM has returned to profitability. 

Air France-KLM argues that the increase sought by staff would set back its restructuring efforts, which aim to help it compete with low-cost carriers like Ryanair and Easyjet and cut its debt.

In the second quarter, the group posted net profits of 109 million euros, down sharply from 593 million for the same period last year, although that figure was boosted by new accounting rules.

By AFP's Clare BYRNE and Sonia WOLF

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