Air-France- KLM Group is facing its biggest crisis in years as Chief Executive Officer Jean-Marc Janaillac prepares to quit amid a deepening labour conflict which the French government warned is threatening its survival.
According to a wire service report, the stock dropped Monday, when Europe’s biggest airline was forced to scrap 15 percent of its flights and said even more would be cancelled on Tuesday due to a series of strikes that began in February.
Investors dumped shares after Mr. Janaillac on Friday unexpectedly lost his high-stakes gamble to bypass unions in a bid to end the crippling walkouts. The CEO is scheduled to submit his resignation to the board May 9 following the rejection by employees of management’s final wage offer. The carrier, whose shares have dropped 46 percent this year, has warned the labor showdown will wipe out at least 300 million euros ($358 million) in operating profit in 2018.
The outgoing CEO has the backing of the French government as President Emmanuel Macron tries to overhaul his country’s economy by liberalizing labour laws. French finance Minister Bruno Le Maire on Sunday said the Air France workers’ demands were unjustified and urged them to show “responsibility.” Taxpayers won’t bail the company out, he said.
“If it doesn’t make the necessary efforts to be at the same competitive level of Lufthansa and other major airlines, it will disappear,” Le Maire said on BFM TV. “I am not taking the money of the French and putting it in a company that isn’t at the required competitive level.”
Philippe Evain, president of the French SNPL pilot union, told RTL radio Monday he was “shocked” by Le Maire’s comments, adding that “the survival of Air France is not in question.”
The Dutch Finance ministry is “keeping an eye on the situation,” spokesman Coen Gelinck said. The government owns just under six percent in the Dutch unit, KLM, while the French state has about a 12 percent stake in the combined group.
Mr. Janaillac, who has been at his post less than two years, used a more conciliatory approach than his predecessor Alexandre De Juniac, who also battled unions. Analysts have compared a rejection of management’s pay proposal by workers to “pressing the self-destruct button.”
The shares fell as much as 14 percent, the most since September 30, 2002, were trading down 9.9 percent to 7.29 euros at 3.58 pm in Paris, giving a market value of 3.1 billion euros. Air France-KLM is the worst performer on the 26-member Bloomberg World Airlines Index.
