Air France's future in the balance, warns economy minister

07 May, 2018, 07:25 | Author: Brooke Harris
  • Air France CEO Jean Marc Janaillac                  AFP  Eric Piermont

The Franco-Dutch group lowered its full-year earnings projections despite strong demand for tickets, Air France-KLM said on Friday.

Jean-Marc Janaillac, boss of parent company Air France-KLM, resigned on Friday after staff rejected a final pay offer from him which would have raised wages by seven percent over four years.

The announcement of his departure came as Air France-KLM released its first-quarter earnings, which showed a net loss of 269 million euros ($322 million), weighed down by three days of strikes which cost about 25 million euros per day according to the company.

Last year, the group made an operating profit of 1.488 billion euros, although that has been restated to 1.9 billion euros due to IFRS accounting rule changes.

French Prime Minister Edouard Philippe has hailed Janaillac's "courageous" decision while calling on both sides "to assume their responsibilities".

In a ballot, 55% of the French employees rejected the deal.

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Meanwhile, the company's unions said further strikes would be staged in the coming days.

Reflecting the benign market backdrop, profits at the KLM unit, which typically has a lower cost base and therefore achieves higher profit margins than the Air France business, improved by 32 million euros to 60 million euros.

"I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes", France's economy minister, Bruno Le Maire, told BFM television.

Air France-KLM (OTCMKTS:AFLYY) was downgraded by equities researchers at ValuEngine from a "buy" rating to a "hold" rating in a research report issued on Friday.

Janaillac was named chief executive in 2016 with a mandate to ease tensions after years of strikes and labour disputes - including a notorious 2015 incident when two executives had their shirts torn off while escaping workers protesting plans to cut almost 3,000 jobs.

As a way through the impasse Janaillac launched a consultation process with all staff including an electronic vote on the company's proposal.

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