Tags: France | aviation | strike | economy

Air France in a Spin as Huge Cost of Strike Revealed

Wednesday, 08 October 2014 06:37 AM

Struggling Air France Wednesday revealed that a record pilots' strike last month cost around 500 million euros, in a dire profit warning that sent its stock price into a tailspin.

The Air France-KLM group, Europe's second-biggest airline, was already in difficulty in a fiercely competitive sector completely revolutionised by low-cost upstarts such as easyJet and Ryanair.

But finance director Pierre-Francois Riolacci told reporters that the combined impact of the 14-day strike and the loss of future custom from disgruntled passengers would be "in the order of 500 million euros" ($632 million)."

"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 320-350 million euros," Riolacci said.

The news sent Air France shares diving on the Paris market, losing more than five percent while the overall market was broadly flat.

Riolacci said the knock-on consequences were harder to calculate exactly but warned 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 record strike between September 15 and 28 in protest at the group's plans to expand its low-cost subsidiary Transavia France.

The airline, which is 16-percent state-backed, sees the development of Transavia France as crucial to compete in the cut-throat world of aviation, particularly on short-distance routes in its home market.

But in a concession to end the strike, Air France management abandoned a strategy to expand Transavia into Europe.

The pilots, some of whom earn up to 250,000 euros ($316,000) per year, were worried their flights could be replaced by Transavia services or that the company would seek to use the cheaper Transavia pilots.

The strike knocked out more than 50 percent of Air France services and sparked political fury, with Prime Minister Manuel Valls saying the industrial action was harming the image of France abroad.

It also boosted Air France's rivals.

"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.

The other leading European low-cost airline easyJet has also said that it was boosted by the Air France strike.

Air France-KLM said its passenger figures were down 15.9 percent in September compared with figures for the same month last year.

The wider group, including Dutch airline KLM, Transavia and Hop!, welcomed 5.7 million passengers aboard last month -- a drop of 16.3 percent compared to 2013.

The financial director stressed however that estimating the cost of the strike was an inexact science.

"It is not possible to estimate precisely how much of this decline is due to the strike and how much is due to the disappointing trend in demand we observed at the beginning of summer and later on," he said.

Air France has since launched an advertising blitz, in Riolacci's words, to "get people back into our planes." The cost of this campaign has been included in the 500 million euro estimate, he said.

Relations between management and the unions are still strained.

A crisis meeting on Tuesday to chart a way forward after the strike broke up shortly after starting due to the uninvited presence of "non-representative" unions.

However, "informal" discussions are taking with labour representatives "to explain without delay the plans for the development of Transavia" said the company.


Air France

© AFP 2018

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France, aviation, strike, economy
Wednesday, 08 October 2014 06:37 AM
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