Air France Shares Drop Sharply As Strikes Continue

Air France Shares Drop Sharply As Strikes Continue

Air France Shares Drop Sharply As Strikes Continue

Air France said 15 per cent of its flights would be cancelled on Monday as pilots and cabin crew went on strike over the pay dispute for a 14th day since February.

The government over the weekend said the French state, the largest shareholder with a 14 per cent stake, would not ride to the airline's rescue.

French Finance Minister Bruno Le Maire had urged the airline and its workers to resume talks on Sunday, saying that if Air France did not become more competitive it "will disappear". It had predicted 85% of flights would operate: 99% of long-haul, 80% of medium-haul to and from Charles de Gaulle and 87% of short-haul.

After a protracted financial slump, Air France-KLM profits climbed previous year as it expanded its global alliances and launched a new budget airline.

Shares in Air France-KLM tumbled on Monday after CEO Jean-Marc Janaillac's gamble to put a salary hike offer to employees backfired on Friday, prompting him to announce he would step down.

At Air France - which is part of an airline alliance with Dutch carrier KLM - the labor dispute intensified on Friday when staff rejected a pay deal worth seven percent over four years.

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Air France warned that industrial action would continue to affect its services today and tomorrow.

"The survival of Air France is in the balance", he said, adding that the state would not serve as a backstop for the airline's debts. Air France-KLM reported a net loss of €269 million ($322 million) in the first quarter of the year.

"The future looks turbulent for the company", said Gregoire Laverne, fund manager at Roche Brune Asset Management, who sold his Air France-KLM shares in September 2017. Intermittent strikes have hampered the airline since February. The company has now taken the plan off the table. There have been strikes at the SNCF rail organization too.

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

"Our demands are far from astronomical", Yannick Floc'h, vice-president of the SNPL pilots union, told BFM TV later in the day, adding there was room to find middle ground between the two sides.

The government's response is seen as a test of labour reforms launched by French President Emmanuel Macron.

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