Air France-KLM shares plunges as CEO to quit

Roman Schwartz
May 8, 2018

Air France expects to cancel one in five flights on Tuesday as staff carry out a fifteenth day of strikes over a pay dispute that has forced the resignation of parent company Air France-KLM's chief executive.

KLM CEO Jean-Marc Janaillac has resigned as the airline faces another round of flight-disrupting strikes this week.

Mr Janaillac is not the first Air France executive to suffer at the hands of its unions.

The Finance Minister of France, Bruno Le Maire, said on Sunday that the government, which owns 14 percent of Air France, would not rescue the airline.

On Monday, the price of the shares of Air France had plunged by almost 13 percent but easily recovered as the day passed on.

The company had offered a staggered 7 per cent pay increase over four years, with 2 per cent in 2018 and further increases dependent on the airline's financial performance.

The carrier, formed by Air France's merger in 2004 with Dutch KLM, saw shares fall by as much as 13 per cent on Monday as investors digested Mr Janaillac's resignation, the government's stance and the strengthened position of the Air France unions.

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CEO Jean-Marc Janaillac's attempt to cut costs at the carrier to keep up with competition from budget airlines and Gulf rivals ran into strong union resistance, as had his predecessor's efforts, raising questions over its ability to reform.

Janaillac will formally resign at a Board of Directors' meeting on May 9, the company said, adding that "it will be their responsibility to take the appropriate measures to ensure the continuity of the group and Air France during the transition period".

Intermittent strikes in recent weeks have prompted the cancellation of a quarter of flights on average.

The Air France drama poses yet another problem for President Emmanuel Macron's government as he marks a year in office.

He urged striking pilots, crew and ground staff to be "responsible" and said the survival of Air France "is at stake".

He warned that the state, which owns 14.3 percent of the group, would not serve as a backstop.

"Air France will disappear if it does not make the necessary efforts to be competitive", he said on BFM television.

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