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Air France announces loss of over $300Mln due to ongoing strikes

08 May 2018

The carrier, formed by Air France's merger in 2004 with Dutch KLM, saw shares fall by as much as 13 per cent on Monday as investors digested Mr Janaillac's resignation, the government's stance and the strengthened position of the Air France unions.

"I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes", Economy Minister Bruno Le Maire told the BFM news channel. While nearly all long-haul flights are predicted to operate, one in five medium-haul services from Charles de Gaulle airport in Paris won't, with short-haul trips from Orly also affected.

But over at Air France, that well-oiled worker conflict played out in a decidedly more retro fashion.

On Friday, Jean-Marc Janaillac, chief executive of parent company Air France-KLM, resigned after staff rejected a final pay offer from him, which would have raised wages by 7% over four years.

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Janaillac initiated a staff-wide consultation April 26 in a bid to end the dispute after unions rejected the carrier's latest offer of a multi-year "growth pact" pay proposal.

On Friday Air France-KLM's chief executive quit over the crisis.

The overall cost of eleven days of strikes is estimated at some 300 million euros (almost $359 million), with one day of protests costing the company slightly more than 25 million euros.

Janaillac warned previous year that volatile fuel prices and geopolitical risks could threaten the company's turnaround, but didn't appear to predict the heavy toll that the strikes would take.

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Societe Generale analysts said the company's employees "have not only forced the group CEO to resign, but also made the investment case obsolete".

Air France-KLM's board is set to announce an "interim governance solution" on May 15 following Janaillac's departure. The company has now taken the plan off the table.

"KLM might (rightfully) ask why the profits are being generated in the Netherlands but the losses being made in France", they said.

In the wake of the rejection of Janaillac's pay deal to Air France staff, a two-day strike over May 7 and 8 has gone ahead.

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The Air France turmoil has coincided with other strike action in France where rail workers press on with rolling stoppages to protest President Emmanuel Macron's planned overhaul of SNCF, the state-run train operator.

Air France announces loss of over $300Mln due to ongoing strikes