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.

Air France's new boss flies into immediate strike threat

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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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.