Air France: New Canadian chief vows to invest half of salary in airline

Air France-KLM's new Canadian boss said Monday that he would invest half of his fixed salary into the company's stock as a gauge of his "confidence" in returning the strike-prone airline to a more solid footing.

Air France: New Canadian chief vows to invest half of salary in airline
Photo: AFP

Benjamin Smith made the pledge in a video message to staff as he officially took up his new position as chief executive at the French-Dutch airline.

His fixed salary is 900,000 euros ($1.0 million) a year, but his total compensation can reach as high as 4.25 million if performance targets are met.

The pay package was roundly criticised by unions, as it is more than three times the amount paid to Smith's French predecessor, who quit in May after gambling his job on getting staff to accept a pay deal that was rejected in a company-wide vote.

“I have already made a personal investment by moving with my family to France,” Smith says in the video, according to a French transcript obtained by AFP.

“Today I have decided to make another investment by investing half my fixed salary in Air France-KLM's share capital,” he said.

“It's a way of demonstrating my confidence in our future success,” he added. “I'm investing because I believe we can win in our market and become number one, but I also want to show my committment.”

The airline has been battling stiff competition from low-cost rivals while also facing aggressive moves by Gulf carriers into Europe.

And French pilots and other workers carried out a series of costly strikes earlier this year after management rebuffed wage demands, leading to losses the airline estimated at 335 million euros.

Earlier this month Dutch pilots reached a deal on wages and working conditions with KLM management after threatening to walk off the jobs.

Unions have also bristled at bringing in a foreigner — Smith is Canadian — to run a company in which the French government still owns a 14.3 percent stake.

But the government has defended his appointment, citing a 19-year career at Air Canada, where he led labour negotiations ahead of the launch of a low-cost subsidiary.

The 47-year-old, who was chief operating officer at Air Canada, is also credited with turning the airline around in the wake of the 2008 global economic crisis.

“We sought out one of the top professionals in the world,” Transport Minister Elisabeth Borne said on French television on Monday.

“What is urgent now is a strategic plan,” she stressed. “Obviously he will be meeting with unions and I hope everyone is going to contribute to this development project for Air France.”

She declined to be drawn out on whether the government planned to sell any of its shares to finance national development projects.

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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.