Union makes offer to end marathon Air France strike

Air France's main pilots' union offered to lift its crippling strike late Friday (Sep 26) if an independent mediator was named to run negotiations in a bitter battle over the fate of the company's low-cost subsidiary.

The SNPL union, in what it called a "gesture of appeasement", said it was "ready to end the conflict as soon as this mediator is named" by the government. The French prime minister's office told AFP there were "no grounds for new negotiations with a mediator".

Over half of Air France's planes were grounded for the 12th day running, and the strike was extended until at least Tuesday, after pilots blocked the most recent management proposals to scale back development plans for its low-cost Transavia airline.

The strike at Europe's second-largest flag carrier is costing an estimated €15 million to €20 million (US$19 million to US$25 million) a day. Prime Minister Manuel Valls on Friday renewed his call for the "unbearable" strike to end. Air France's share price has fallen nearly 15 per cent since the stoppage began. "This strike is catastrophic for the French aviation sector," read a joint statement from key industry unions, including those representing travel operators. "In a more-than-morose economic context, it is compromising a future that is already seriously under threat," read the statement.

Air France's management also rejected the idea of a mediator, and voiced surprise that pilots' representatives had left the negotiating table on Friday while "discussions were going well". "We aren't far from a solution," said spokesman Eric Schramm. He stressed however that the company was in an "extremely delicate" situation, losing €20 million each day of the strike.

The protracted strike, and fruitless negotiations, have also prompted anger among aviation staff grounded alongside their planes, around 200 of whom protested against the stoppage on Friday.

CONCESSIONS NOT ENOUGH

A concession from management to scrap plans to expand Transavia further into Europe was "necessary, but not enough" to stop the strike, SNPL spokesman Guillaume Schmid said on Friday. Schmid later called on the government to name an "independent mediator as quickly as possible". He blasted Air France-KLM chief executive Alexandre de Juniac for "his inability to carry out a respectful dialogue" with the unions.

The pilots are fighting for a "single contract" across Air France-KLM's subsidiaries to avoid being forced to accept less attractive working conditions at Transavia. Transavia currently serves holiday destinations across Europe and the Mediterranean.

Air France pilots, who earn up to €250,000 a year, fear some flights will be replaced with services operated by Transavia. They fear they will end up earning less and having shorter recovery times between flights. A Transavia captain earns up to €160,000 a year, although co-pilots on both airlines will earn roughly the same amount as each other at the beginning of their careers, according to sources.

LOW-COST A GROWTH OPPORTUNITY

While Air France management agreed to scrap the development of Transavia abroad, it has vowed to maintain at least some part of its plans to enter the low-cost market, a key "growth opportunity", according to de Juniac. The Air France-KLM board of directors has thrown its support behind management.

The withdrawal of plans to expand Transavia will come as a blow to the airline's efforts to be more competitive in the crowded and changing European skies, increasingly dominated by no-frills operators such as Irish airline Ryanair.

France's MEDEF employers' association said on Thursday the conflict at Air France - which is 16 per cent state-owned - encapsulated the malaise gripping the country's crisis-hit economy. The union action is "again dragging a company into the red", said MEDEF vice-president Jean-Francois Pillard. "For those who want to invest or travel in France, this does not contribute, at an already extremely difficult time, to improving the image of the country," he said.

Air France has already implemented an ambitious restructuring plan to reduce costs and improve efficiency. "Low-cost airlines now represent between 25 and 45 per cent of air traffic in Europe, depending on the country," said Didier Brechemier, an aviation expert at consultants Roland Berger.

Ryanair will soon expand its fleet to 400, which would take it above Air France's 350 aircraft. "With competitors like that it's not hard to see why Ryanair is the fastest-growing airline in Europe," company boss Michael O'Leary said dismissively of Air France's offer to put its expansion plans on ice.

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Air France-KLM sees lower profit on over-capacity, weak cargo

Air France-KLM on Tuesday slashed its earnings forecast for 2014, hit by over-capacity in traditionally lucrative long-haul routes and persistently weak cargo demand.

Europe's second biggest airline after Lufthansa said earnings before tax, depreciation and amortisation for the full year would now reach around 2.2 billion and 2.3 billion euros ($3.0 billion and $3.1 billion), rather than 2.5 billion euros previously forecasted.

In its monthly traffic update, the airline said passenger numbers rose by 2.9 per cent in June, but yields did not keep pace as intense competition held ticket prices down.

"While not representing a turning point in market trends, the June traffic figures published today as well as bookings for July and August nevertheless reflect the over-capacity on certain long-haul routes, notably North America and Asia, with the attendant impact on yields," the airline said in a statement.

Cargo traffic meanwhile fell by 4.3 per cent in June, as the airline highlighted "persistently weak demand".

The airline said Venezuela's failure to release payments added to its decision to cut its profit target.

Venezuela's strict exchange rate controls require airlines to sell tickets in bolivars which the government promises to reimburse in dollars at a pre-determined rate.

But Caracas's failure to repay airlines in time has forced many to cut back or suspend their services.

Air France-KLM said Venezuelan routes were extremely lucrative before the debt issue.

Some "$290 million in revenues are held there" pending a deal with the government, the airline said.

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Swiss regulator fines airlines for freight rate cartel

Switzerland's competition authority said on Friday that it had fined 11 airlines for fixing the freight market a decade ago, with Air France-KLM hit with the highest penalty.

"Between 2000 and 2005 several airlines agreed on certain elements of the price for air freight transport," it said in a statement.

"The investigation of the Competition Commission revealed that the airlines had agreed on freight rates, fuel surcharges, war risk surcharges, customs clearance surcharges for the US and the commissioning of surcharges," it added.

Such behaviour constituted a "serious infringement" of anti-cartel laws, it underlined.

The 11 carriers were fined a total of 11 million Swiss francs (9.16 million euros, US$12 million).

The penalty for Franco-Dutch company Air France-KLM was 3.9 million Swiss francs, which the competition authority noted was a "substantial reduction" on the potential sanction, after the carrier submitted a leniency application.

American Airlines was ordered to pay 2.2 million francs, and United Airlines, 2.1 million.

Also sanctioned were British Airways, Korean Air Lines, US company Atlas Air, Nordic carrier SAS, Japan Airlines, Singapore Airlines, Hong Kong's Cathay Pacific Airways, and Luxembourg-based Cargolux.

Like Air France-KLM, British Airways, Cathay Pacific, Japan Airlines, and Cargolux also received reduced sanctions after asking for leniency.

The competition authority said that the case was opened after Germany's Lufthansa opted to reveal the market fixing, in which it was itself involved.

As a result of having turned itself in, Lufthansa was granted immunity from any sanctions, along with its subsidiary Swiss International Air Lines which also took part in market collusion.

The competition authority said that the US Department of Justice and authorities in the European Union -- of which Switzerland is not a member -- had also investigated and fined various airlines involved in the case.

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Dutch national carrier KLM cancels flights as storm looms

Dutch national carrier KLM said it has scrapped 84 flights to and from Amsterdam's Schiphol airport scheduled for Thursday after forecasters sounded a "code orange" extreme weather warning for the next 24 hours.

The Netherlands is preparing for heavy storms with surging tides and winds predicted to gust up to 130 kilometres per hour in places in the north.

In the south, the landmark Eastern Scheldt storm surge barrier has been closed off for the first time in six years, public broadcaster NOS reported.

"As a result of the extreme weather expected, we have cancelled 84 flights to and from Amsterdam," KLM (Royal Dutch Airlines) spokesman Joost Ruempol told AFP.

"These are flights going to and coming in from across the continent," he added.

Inter-continental flights will go ahead as scheduled, but travellers flying KLM to European destinations are advised to check for regular updates on the airline's website, Ruempol said.

Schiphol is Europe's fourth-busiest airport with between 120,000 to 140,000 passengers passing through daily.

The storm will approach the Netherlands from the west and was a result of a low-pressure system over Norway, bringing extreme weather to the Dutch coast by Thursday afternoon, a weather website said.

Coupled with a spring tide, high winds could result in a heavy storm surge and in many places, the Dutch have been taking measures including raising dykes and moving vehicles away from piers and quays.

The Eastern Scheldt storm surge barrier, part of fortifications to protect the low-lying Netherlands from the North Sea, has been closed off for the first time since 2007, the NOS said.

The flood barrier is part of the so-called Delta Works which were built after disastrous floods in 1953 which left almost 2,000 people dead.

Back then, sea defences were overwhelmed and dykes broke as a result of heavy storms, putting large swathes of the southern Dutch province of Zeeland under water.

A code orange warning is one level below a "code red alert" - given out by the Royal Dutch Meterological Institute (KNMI) for the worst possible weather conditions.

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Air France sets out conditions for Alitalia investment

Air France-KLM has laid out strict conditions for further investment in Italy's troubled Alitalia airline, including the cutting of 5,000 jobs, Italy's top business daily reported on Sunday.

The conditions, including the ousting of Alitalia's board of directors and a vast debt restructuring plan, were presented to Italy's transport minister Maurizio Lupi some 10 days ago, Il Sole 24 Ore said, without citing sources.

The job losses are far greater than those tabled by the Italian airline in its current restructuring plan, the report said.

Alitalia has been trying to persuade shareholders to inject funds as part of a 300 million euros ($407 million) recapitalisation programme.

Shareholders including Air France-KLM, which currently holds a 25 percent stake in Alitalia, have until the middle of November to decide whether or not to participate in the capital increase.

Air France-KLM chief executive Alexandre de Juniac said Thursday that since talks on recapitalisation began, the French group had been clear about requiring "strict financial, industrial and social conditions" and a "profound restructuring" for Alitalia.

The capital increase plan was put together in a hurry under pressure from the government, as energy major ENI threatened to ground the fleet by stopping fuel supplies because of unpaid debts.

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