Air France's stock sinks as government warns on its future
In this Sept.15, 2014 file photo, Air France planes are parked on the tarmac of the Paris Charles de Gaulle airport, in Roissy, near Paris.(AP Photo/Christophe Ena)
The Associated Press
Published Monday, May 7, 2018 7:19AM EDT
Last Updated Monday, May 7, 2018 10:55AM EDT
PARIS -- Air France's share price dived Monday after its CEO quit and the French government warned that the country's flagship carrier might collapse.
A new strike Monday over wage demands, meanwhile, prompted the cancellation of about 15 per cent of Air France flights worldwide. The number of striking staffers appears to be slightly declining as the airline enters its 14th day of walkouts this year, but the labour action has already cost the company more than 300 million euros ($360 million) in a matter of weeks.
Amid questions about its future management and direction, Air France's share price plunged nearly 13 per cent at the open Monday but recovered as the day went on. By early afternoon Paris time, Air France shares were down 9.7 per cent at 7.31 euros.
The share price woes follow the resignation Friday evening of Air France-KLM CEO Jean-Marc Janaillac after workers rejected the company's latest wage proposal.
The Air France drama is posing yet another problem for President Emmanuel Macron's government as he marks one year in office. The airline's labour dispute come as separate strikes over Macron's labour reforms are hitting France's national railways.
French Finance Minister Bruno Le Maire on Sunday said the government, which owns 14 per cent of Air France, would not rescue the airline.
He urged striking pilots, crew and ground staff to be "responsible" and said "the survival of Air France is at stake."
"Air France will disappear if it does not make the necessary efforts to be competitive," he said on BFM television.
The strikes have taken a heavier toll on Air France than management and investors expected, and the company last week forecast a "notably" lower income this year compared to 2017.
Unions want a 5.1 per cent pay rise this year, arguing that the company is making enough of a profit to meet their demands. They noted that their wages have been frozen since 2011 as the airline cut jobs and restructured.
The company argues that the union demands would wipe out hard-earned gains from the restructuring, which was aimed at stemming years of losses and keeping Air France afloat, as well as jeopardize efforts to win back market share from low-cost airlines and big-spending Mideast and Asian carriers.
After protracted negotiations, management last week offered a 2 per cent pay rise this year and an additional 5 per cent over 2019-2021.
Employees rejected that offer Friday, prompting the CEO's decision to step down. He called the dispute a "huge waste that can only make our competitors rejoice."
The Air France-KLM board asked Janaillac to stay on until May 15 when it will put a transitional leadership in place.