Air France estimates strike cost at US$632m

Struggling French flag carrier Air France on Wednesday (Oct 8) said last month's two-week strike would have an impact of around €500 million (US$632 million) on its bottom line for this year.

Taking into account the lost revenue during the strike and the knock-on impact of disgruntled passengers staying away in future, the impact over 2014 will be "in the order of €500 million", said financial director Pierre-Francois Riolacci. "We need a few more days to finalise completely our estimates. But we think the impact on the third quarter will be in a range of €320 to €350 million," Riolacci said.

He warned the knock-on consequences were harder to put a figure on but said there would be an impact both on the last quarter of the year and the first part of next year as Air France, Europe's second-largest airline, battles to win back its reputation.

"We made some savings (like in aviation fuel) because the planes were not flying," he noted. "On the other hand, we had additional costs: putting passengers up, compensation or buying tickets from our competitors for some of our passengers, which we did not always get at the best price," he said.

Pilots at Air France waged the longest strike in the company's history between Sep 15 and 28 in protest at the group's plans to expand its low-cost subsidiary Transavia France. The airline sees the development of Transavia France as crucial to compete in the cut-throat world of aviation which has been revolutionised by the arrival of low-cost operators like easyJet and Ryanair.

But the pilots, some of whom earn up to €250,000 per year, were worried their flights could be replaced by Transavia services or that the company would seek to use the cheaper Transavia pilots.

SOURCE

Air France pilots end record strike

Air France's main pilots' union Sunday (Sep 28) ended the longest strike in the carrier's history to allow "calmer" talks to go ahead over the contentious issue of the airline's low-cost subsidiary Transavia.

A spokesman for the SNPL union, Guillaume Schmid, told AFP the pilots were ending the protest - which has cost Air France more than 200 million euros (S$323 million) over the past two weeks - so that the negotiations over Transavia can proceed.

Air France sees Transavia's development as vital in the struggle to retain market share in the cutthroat medium-haul sector, which is steadily being overrun by no-frills airlines such as easyJet and Ryanair. But Air France pilots, who earn up to 250,000 euros a year, fear some of their flights will be replaced with services operated by Transavia, or their contracts will be squeezed by the expansion of the subsidiary.

Immediately after the pilots' union announced the end of the strike, French Prime Minister Manuel Valls called on all sides to "regain the confidence of everyone and resume the development of Air France and its subsidiary Transavia, which is an asset". Valls said the 14-day strike was "misunderstood and penalised passengers, the company and the country's economy".

The protest saw half of Air France's fleet grounded, and cost the airline between 15 million and 20 million euros a day. Thousands of passengers had travel plans disrupted.

TALKS DEADLOCKED

On Friday, Valls ruled out a proposal by the pilots to lift the strike if an independent mediator was named to run the thorny negotiations. Talks over the issue have been deadlocked. The latest round, which ended early Sunday, "did not suit us," Schmid said. But he said the decision had been taken to lift the protest to allow discussions "in a calmer climate".

The pilots are fighting for a "single contract" across Air France-KLM and its subsidiaries to avoid being forced to accept less attractive working conditions at Transavia, which serves holiday destinations across Europe and the Mediterranean. A Transavia captain earns up to 160,000 euros a year but clocks up significantly more flights than one flying for Air France. Co-pilots on both airlines earn roughly the same amount at the beginning of their careers, according to sources.

The French state holds a 16 per cent stake in Air France-KLM, the second-largest European carrier after Germany's Lufthansa. Air France's share price plunged nearly 15 per cent since the stoppage began and the protest fuelled wide concern in France.

The strike was "catastrophic for the French aviation sector," a joint statement from key industry unions, including those representing travel operators, had warned. "In a more-than-morose economic context, it is compromising a future that is already seriously under threat," read the statement.

Air France has already implemented an ambitious restructuring plan to reduce costs and improve efficiency.

While the 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.

SOURCE

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.

SOURCE

Pilots reject Air France offer to end strike

Air France pilots on Monday (Sep 22) rejected a last-ditch management attempt to end the longest strike at the airline since 1998 that is costing up to €20 million (US$25.7 million) every day.

The main pilots' union dismissed as a "smoke screen" the chief executive's offer to freeze the development of a subsidiary budget airline that management sees as vital to compete in the cut-throat aviation market. The management proposal "is nothing but a smoke screen that offers no more guarantees than previous offers and does not solve any problem," the SNPL union said in a statement.

Air France chief executive Alexandre de Juniac said earlier on Monday that this was the "last offer" to break the deadlock that has grounded on average 60 per cent of the French flag carrier's fleet.

The pilots are on strike in protest at the airline's plans to develop Transavia France, which serves holiday destinations, primarily in the Mediterranean. They fear the airline will attempt to replace expensive Air France pilots, who can earn up to €250,000 (YS$321,000) a year, with Transavia pilots, who are paid considerably less.

De Juniac offered "to suspend the plan to create Transavia subsidiaries in Europe until the end of the year" in order to have "a deeper dialogue" with pilots, but insisted the overall project could not be called into question.

Air France said the strike was costing them "up to €20 million per day" and said it would update its profit forecasts when the strike was over. "The pilots' strike has had disastrous consequences for customers, employees and the company's finances," the airline said in a statement.

Unions have threatened to extend the strike - already the longest in 16 years - until Friday unless their demands are met.

AIR FRANCE FATE 'AT STAKE'

Air France has made concessions - notably an offer to limit the Transavia fleet to 30 planes compared with 37 originally planned - but to no avail so far.

"This strike is becoming interminable," said Jean-Claude Delarue, president of a travellers' federation. "You have to ask yourself whether Air France will end up losing market share because travellers will end up going elsewhere," said Delarue.

The government has called several times for an end to the strike, with Prime Minister Manuel Valls warning that the image of the eurozone's second largest economy was at risk. Transport Minister Alain Vidalies warned over the weekend that "the fate of the company could be at stake". "The low cost (arena) is not a choice, it's an obligatory move, that's reality. I think pilots are fully aware of this," he told French radio.

Management has sent an email to its pilots to try to put an end to what it said were attempts of "intimidation" against pilots who were continuing to work. "Air France management will not tolerate any misdemeanour and will initiate steps necessary to punish those who engage in such acts," read the email, obtained by AFP.

The company also wrote to its passengers to express its "frustration" and "unhappiness". It asked customers who have booked a ticket before September 26 to delay their trip or change their flight free of charge.

In an apologetic message to its frequent flyers, the wider Air France-KLM group has said its aim was to offer "competitive" fares and Transavia was meant to complement Air France's operations without creating any "adverse impact on Air France staff".

Throughout the strike, the atmosphere at airports has been remarkably quiet, as the company has been warning travellers in advance that their flights are cancelled.

SOURCE