While Air France continues to strike and lose money, KLM is growing angrier by the day. Is the marriage in jeopardy?
An unnamed source told Bloomberg that KLM is exasperated and is now looking at retooling management structure to appoint a deputy CEO from the KLM side. The 2004 merger between Air France and KLM calls for a French CEO and Dutch deputy, but the the deputy position has remained vacant for the last four years.
The problem is deeper than a seat at the table, though. It’s one of numbers. While Air France-KLM expects to be profitable for the year, KLM is propping up Air France. Air France lost $211MN in the first quarter while KLM reported $60MN in profit. This KLM profit came from only two-thirds of the revenue of Air France.
Air France employees have organized 15 strikes since February, which will translate to over $300MN in lost profit for the year. Meanwhile, KLM pilots have not struck since 1995 and KLM cabin crew have struck…for one day…over Amsterdam expansion issues, not wages.
But the Dutch side is not alone in its anger. The French government owns 14% of Air France and is both angry and embarrassed. The Emmanuel Macron government has clearly warned that it will not bail out Air France. Macron may even support Pieter Elbers, the current KLM Chief Executive, as the new Group Chief of Air France-KLM.
Elbers told a Dutch TV station over the weekend that divorce was not the answer.
We have accomplished a lot together and not everything is reflected in the balance sheet.
Yet change is inevitable. The Dutch side of the company will soon have a more powerful voice at the table whether in the form of the CEO of the group or in a deputy role.
CONCLUSION
Whatever your view on the labor situation at Air France, the status quo is not sustainable. The strikes aside, high built-in costs have made Air France uncompetitive both on a longhaul and shorthaul basis within Europe. While British Airways and Lufthansa have adapted, Air France has not. Change is coming, whether the labor unions at Air France continue to resist the inevitable or not.
No doubt people have seen the footage from industrial action a few years ago in which a feral union mob ripped the shirts off 2 AF execs ( literally). AF like to ridicule Alitalia but now finds itself in a similarly vulnerable situation.
The suggestion that a Dutch CEO be appointed: red rag to a bull in respect of the unions, so probably a bit fraught.
The unions took succour from milquetoast Hollande and his cronies but are now discovering that Macron is a different kettle of fish entirely.
It would be beyond horrible to see AF weaken further and potentially go under. No doubt LH would be at the ready to propose an anschluss.
Downscale AF’s operation and expand the routes through Amsterdam. At least the Dutch have their employee in heart.
What do you think Delta’s opinion is on this?
Good question, but I know they cannot be happy.
https://www.reuters.com/article/us-air-france-klm-klm-ceo/klm-ceo-says-unrealistic-dutch-business-could-leave-air-france-idUSKCN1IF16Y
“He said hopes the French government would ultimately come to the company’s rescue were also an “illusion” because state aid is forbidden by European Union law.’ Certainly closes that door.
lol unions at it again…
There needs to be a balance between employees and execs. It’ll be pretty ironic when they are all out of jobs because they dragged the company down by not working.
Dear Mathew….you are a witting or unwitting gnome in the service of business interests at the expense of working unionized people everywhere. Grow up.
Nope, the Air France employees need to wake up. I’m tired of the strikes and the unreasonable demands. Let Air France go under and see how much they are paid by EasyJet or Ryanair. The labor situation has changed and the past is unsustainable. I fully support Macron’s efforts to reform the French labor system, including breaking the AF industrial action once and for all.
I own a home in France and spend half the year here. It amazes me that in a country where only 8% of the population belongs to a union, the unions continue to have such enormous clout. That the general populations tends to support these unions (especially the tiresome CGT) even when life here is often made extremely difficult by one strike after, day after day, is mystifying.
Rail strikes are so common these days that I’ve given-up even considering taking a train. SNCF is offering discounts of 40% and more to try to lure the French back onto the trains, but who wants to buy a ticket only to find that the train one has booked has been cancelled? (Along with all the others that day.)
The issues at Air France are only the tip of the iceberg in this country. Macron has a huge job ahead of him and I give him credit for tackling issues that his predecessors have swept under their (Aubusson) carpets.
Not surprising. AF will be the death of KL.
If “adapting” describes what’s happened to British Airways, surely that isn’t the path we want Air France to follow . . .
Survivalist strategy for sure, but what Air France has is not sustainable. It’s simply not. And I’m sick of the strikes that affect me and my clients.
https://www.reuters.com/article/us-air-france-klm-unions/air-france-to-present-measures-to-respond-to-staff-malaise-on-june-14-idUSKCN1J41QL
Lame Article, this is all speculation!
Please tell me also how has British Airways adapted to the current airline environment??? Hiring mixed crews with two separate contracts?? Ditching a pension scheme for another that benefits them???
It really seems that instead of writing a non biased article you have chosen to write something based on the fact that you do not care for Unionized workers….
Air France workers have every right to strike, legally and within the scope that the law allows. If you don’t like it then don’t fly them….
Also how is that law suit with Air Canada Aeroplan coming along on your first class tickets???
Bullshit. Lack of Unions is why Asian countries grow so fast. Unions have to be mediated by economical factors.
Perhaps AF can just keep raising their prices until they make a profit! I quite like AF’s product, but I don’t plan to fly it later this month to CDG, and it is hard to see this ending well for AF or its workers if they cannot bring back dependability and price-competitiveness. Also, I would gather that the interlining of customers will result in a lot of AF passengers on cancelled flights being rerouted onto DL. I wonder how they feel about that? I suppose they make money, but with a lot of administrative headache.
On my very last flight w AF from Asia to Europe some 3-4 yrs ago, I was seated in byz class window seat. The parallel seats configuration did not allow me to step over my aisle seat neigbour without waking her up. So i just hit the button, called the steward and asked him for some drink. You know what his reply was? “Messieur, you know you can pick the drinks yourself at the back of the cabin?” So here I was, having paid some 4000eur for the ticket and this guy is telling me I am supposed to pick the drink by myself. (Actually I wouldn’t have mind doing that, rather than having to face someone with an attitude of a kid distracted from his ipad game. I just did not want to wake up the person next to me!) Ok, I got the message and I’ve never flew with AF since. And that is the biggest problem of AF, which KLM does not have. French people think very simply that everyone is equal and they just dont care if you paid 500 for economy or 5000 for byz. Dutch staff on the contrary is always super-professional, smiling, when you are in mood for small talk, they chat with you, when you are tired or grumpy, they make sure you got everything and leave you alone .. I have been flying with them for 10+ yrs, and in the service department, not a single issue or complaint. Not to mention Middle East, Cathay or the other East Asian airlines, where you are treated like a maharaja by default, even if you’ve only happened to get upgraded to byz due to overbooking. This “l’egalite” thing may have been quite good invention in politics, but it has made all French services definitely one of the worst in Europe – including AF.
Well, since France is one of largest service economies in europe and in the World (in terms of services is largest than Germany), your assumption is completely wrong and it’s based either in racism or prejudice against France.
Unions have a too strong presence in some public companies in France, that’s for sure and i agree, but that doesn’t make France a country with bad companies or bad economy, it’s one of the largest and richest countries in the World mostly due to its great companies.
Best Regards.