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AIR FRANCE

‘Incomprehensible’: Why are the French and the Dutch fighting over Air France-KLM?

A fight for influence over Air France-KLM has erupted in a diplomatic spat between France and the Netherlands. But what's it all about?

'Incomprehensible': Why are the French and the Dutch fighting over Air France-KLM?
Photo: AFP
A fight for influence over Air France-KLM has erupted in a diplomatic spat between France and the Netherlands, after Dutch authorities bought a major stake in the airline, then increased it, to stave off a suspected attempt to consolidate more operations in France.
 
On Wednesday evening, the Dutch government announced it had increased its stake to 14 percent, up from the 12.7 percent it had previously acquired and announced a day earlier.
   
The French government owns a 14.3-percent share in the carrier, which Dutch Finance Minister Wopke Hoekstra said Tuesday The Hague aimed to eventually 
match.
   
“With this share purchase, the Dutch cabinet wants to be able to directly influence the future development of Air France-KLM in order to optimally ensure the Dutch public interest,” the minister said.
   
However, with Wednesday's announcement, the Dutch government said the purchase of Air France-KLM shares has been “halted.”
 
Finally: Air France and unions seal deal to end months of strikes
Photo: AFP
   
The acquisition caught the French establishment off guard.
   
“The government was not informed of this decision, nor its implementation. I take note of it. It's now up to the Dutch government to clarify its intentions,” President Emmanuel Macron said at a press conference in Paris, referring to Tuesday's announcement of the 12.7-percent acquisition.
   
Finance Minister Bruno Le Maire said he would hold talks with Hoekstra in Paris this week over what he termed an “incomprehensible” move.
   
“I consider that there is strength in union, and in the aerospace sector we have to consolidate our positions, and I believe it's always better to pursue this consolidation with transparency and trust,” Le Maire said at a press conference.
   
The conflict poses a tricky challenge for Ben Smith, a Canadian who became the first non-French leader of the airline last September following months of strikes that cost the previous CEO his job.
   
Concerns have been growing in the Netherlands that Smith is looking to shift more KLM flights to Paris from Amsterdam's Schiphol airport in a bid to better compete against Lufthansa and also IAG, the owner of British Airways and Iberia.
   
“KLM's position has been constantly eroded over the past few months,” Hoekstra said on Tuesday. “We now have a seat at the table.”
   
The prospect of a full-blown management battle sent investors fleeing, with Air France-KLM shares plunging well over 10 percent in afternoon trading.
 
The Dutch government took advantage of the cut-price shares to add to its stake.
 
Unresponsive Air France jet escorted down in UK
Photo: AFP
 
Simmering tensions
 
The Dutch move comes a week after the airline posted a surge in net profit to 409 million euros ($465 million) last year, up from just 163 million euros.
   
But most of that growth was thanks to the Dutch arm of the company, KLM, whose operating profit of 1.1 billion euros far outstripped the 266 million at Air France, which was hit by a series of costly strikes over pay.
   
Dutch worries intensified during recent wrangling over the fate of KLM chief executive Pieter Elbers, after doubts arose over whether he would keep his job.
   
Dutch media had reported that Smith considered Elbers “difficult”, and the Dutch government stepped in to back his reappointment after KLM workers threatened to go on strike if he were axed.
   
Dutch Prime Minister Mark Rutte stressed this month that “KLM was extremely important to the economy of the Netherlands”, and that it was “essential that it should be well run”.
   
According to Dutch daily De Volkskrant, Rutte called Macron to inform him of the stake purchase — but only after it was completed.
 
'Transparency and trust'
 
The Air France-KLM board, hastily convened on Wednesday, said afterwards it would “closely monitor the consequences” of the Dutch move, and ensure that it did “not negatively impact the new working dynamic” put into place by the company's CEO.
   
Analysts at French bank Societe Generale, meanwhile, said Dutch officials would probably now ask for additional representation on the airline's board. 
   
“The aviation sector is extremely competitive, and the only goal… is to reinforce Air France-KLM's competitiveness,” Le Maire said.
   
The head of the CFE-CGC Air France union, Bernard Garbiso, termed the Dutch move “chauvinist”.
   
“It's not a good thing to have KLM trying to take power away from Air France,” he said.
   
“One shouldn't forget that, once upon a time, it was Air France which allowed KLM to be saved,” he added.

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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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