Air France-KLM, one of the world’s biggest airline groups, is in deep trouble. Its CEO stepped down on Friday, its shares are tumbling and passengers are facing yet more disruption to their flights.
Why? Big-time industrial action. Here’s what you need to know.
What started this?
Air France-KLM (AFLYY), which dates back to the merger of the French and Dutch national carriers some 14 years ago, has for a long time had trouble with the French unions. In recent years, the pilot’s union SNPL has carried out strikes over job relocations, working conditions and of course pay.
The current strikes, which began in February, are about pay. The unions want an immediate 5.1% raise, while management has proposed a 7% increase over four years, plus 1% this year.
Air France’s proposal to its staff went to a vote on Friday, and 55% voted against it. So chief executive Jean-Marc Janaillac said he would resign.
Then what happened?
Air France-KLM’s stock cratered. It fell by as much as 13% before recovered very slightly—at the time of writing on Monday morning, it’s still 11.6% down.
Janaillac, who has described the situation as “an enormous mess that will only put a smile on the faces of our competitors,” is set to hand in his resignation on Wednesday.
Meanwhile, further walkouts are scheduled for Monday and Tuesday, which will lead to more delays and cancellations for passengers.
What’s this really about?
This isn’t merely a case of workers against management. The Air France strikes must be seen in the wider context of a growing pushback against President Emmanuel Macron’s attempt to “modernize” the French labor market.
Macron’s pro-business ethos and bullish style have pitted him against France’s powerful labor unions, who want to retain the country’s strong workers’ rights. The president has also taken on France’s railway unions by trying to abolish jobs-for-life and reform pensions at state rail firm SNCF, again leading to strikes. Even French garbage collectors have been striking.
In the case of Air France, Macron’s government has been weighing in against the unions, with economic minister Bruno Le Maire warning that the carrier could “disappear” as a result of the industrial action. The government owns 1.43% of Air France-KLM, but says it won’t bail it out although each strike day (today’s is the 14th) costs the airline at least €25 million ($29.8 million.)
In a Sunday statement, the SNPL union claimed Air France-KLM was able to deal with the losses as it was a “perfectly healthy group economically,” and in any case it was the government that was responsible for what’s going on.
“We know perfectly well that the true decision-maker from the beginning of this conflict remains the state,” the pilot’s union said.