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AIR FRANCE

‘Inconceivable’: Air France appoints its first non-French boss

Air France-KLM named its first non-French chief executive on Thursday (Aug 16), handing the reins to Air Canada's Ben Smith despite strong resistance from the group's powerful trade unions.

'Inconceivable': Air France appoints its first non-French boss
Photos: AFP/Air Canada

It was “inconceivable that the Air France company, French since 1933, falls into the hands of a foreign executive whose candidacy is being promoted by a competitor,” said a statement from nine out of 10 Air France unions on Thursday morning.

The competitor referred to was Delta Airlines, the US airline which owns 8.8 per cent of the capital of Air France-KLM, the parent group formed out of the merger of Air France and KLM of the Netherlands in 2004.

The union statement added that the new boss needed “intimate knowledge … of the French social model”, which often results in confrontations between employees and management.

The group's management said on Thursday evening that Smith, the current number two at Air Canada who won approval from the French government, would start work with the group by the end of September.

“It's a chance for Air France-KLM to attract a leader of this stature who has great experience acquired through 19 years with Air Canada, an openness to dialogue and a large capacity to transform,” Economy Minister Bruno Le Maire and Transport Minister Elisabeth Borne said in a joint statement.

The French state retains a 14.3 per cent shareholding in Air France-KLM.

One of Smith's biggest tasks will be negotiating a new pay deal with the French labour groups behind a series of strikes between February and June that forced out former boss Jean-Marc Janaillac.

“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,” Smith said in a statement after the announcement.

As chief operating officer at Air Canada, Smith 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.

But his proposed salary, reported to be several times higher than that of Janaillac, could also undermine goodwill towards him among employees, who have suffered years of cutbacks and job losses.

The union representing pilots at KLM, the Dutch arm of the group, has also made fresh pay demands and threatened strikes unless a new deal is offered to its members.

KLM's chief executive Pieter Elbers congratulated Smith on his appointment.

“It is with great confidence that I look forward to working together and jointly tackling the challenges that face (the) … group,” he said in a statement.

Calin Rovinescu, Air Canada CEO, also said he would “wish (Smith) well in his future endeavours.”

Management Shakeup

The Franco-Dutch airline had been searching for a new boss since Janaillac resigned in May, having gambled his job on getting Air France staff to accept a new pay deal after months of strikes.

Janaillac wished Smith luck on Twitter, saying he hoped the appointment would “allow AFKLM … to play a major role in the development of the industry.”

Smith's nomination may also be accompanied by a shake-up of the company's governance, with the splitting of the roles of chairman and chief executive, which were previously held by the same person.

Air France shares have plunged more than 35 per cent since the start of the year, although they have stabilised since Janaillac's departure.

The group this month estimated the cost of the 15 days of French strikes between February and June at €335 million.

After years of losses and restructuring, the company has returned to profit, leading to the increased pay demands from unions.

It reported net profits of €109 million for the second quarter – down sharply from €593 million for the same period last year, although that figure was boosted by new accounting rules.


 

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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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