Could Air France shrink like Alitalia?

Thu Oct 8, 2015 6:13pm EDT
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By Cyril Altmeyer and Victoria Bryan

PARIS/BERLIN (Reuters) - In 2008, air passenger demand was dipping, Gulf countries were building up their national fleets, and easyJet set up shop in Paris. Other European airlines cut routes and jobs in response. Air France did not. It has not made a profit since.

The timing of its attempt to catch up seven years later plays into the hands of aggressive competitors, former airline executives, analysts and union officials say, and its decision to slash long-haul routes by 10 percent leaves unsolved the problem of a bloated cost base.

"Many of us in senior management saw this coming," said a former Air France boss now working for one of its fast-growing competitors.

"If you want to be competitive with low cost, and stop them getting too big too quickly, you have to put your own house in order. We didn't do that. We procrastinated."

This week's scenes at the airline's Paris headquarters, when angry workers tore the shirt off a company executive and a security man was knocked unconscious after mass job cuts were announced, are one reminder of the task Air France bosses face.

A pilots' strike this year that cost 500 million euros ($562 million) is another.

The company has also struggled to get its own low-cost business off the ground in the face of union opposition.

France is a notoriously tough place to reduce pay and erode workers' privileges the way corporations have elsewhere. Air France says its pilots work 15 to 20 percent less than their European peers for the same pay.   Continued...

Striking employees of Air France demonstrate in front of the Air France headquarters building at the Charles de Gaulle International Airport in Roissy, near Paris, France, October 5, 2015. REUTERS/Jacky Naegelen