Air France-KLM CEO targets high costs, lack of trust with new project

Wed Oct 12, 2016 1:33pm EDT
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By Andrea Shalal

BERLIN (Reuters) - Three months after taking over at Air France-KLM SA (AIRF.PA: Quote), Jean-Marc Janaillac says the loss-making airline has big problems, including high costs, an unwieldy corporate structure and a lack of trust among different parts of the company.

"What is striking is the fact that we are working in an industry that is growing and we are not growing at the pace of the industry," Chairman and Chief Executive Janaillac told a small group of reporters in Berlin.

"In terms of competitiveness we are lagging behind our competitors and our cost structure is still too high," he said. "We still have work to do."

Franco-Dutch Air France-KLM has struggled in recent years with weak demand and overcapacity across the industry. It has been striving to cut costs to compete better with deep-pocketed Gulf airlines and fast-growing European low-cost carriers.

Janaillac is due to unveil a new project called "Trust Together" in early November to answer questions about the company's future strategy, map out goals and plans for how to compete in an increasingly difficult global market.

Janaillac said the company also had key strengths, such as its brand names and two important hubs, but it still needed to increase productivity, lower costs and streamline its structure.

He said he was not expecting the lack of trust he found between parts of the organization after the 2014 pilot strike and between parts of Air France and KLM, which merged in 2004.

Janaillac gave no specific details of the "Trust" project and declined to confirm the company will enter the long-haul low-cost market, but he expected months of negotiations with unions representing pilots and key staff to enable further actions, with a goal of wrapping up those talks in late January.   Continued...

Jean-Marc Janaillac, Chairman and Chief Executive Officer of Air France-KLM, attends a news conference at the IFTM Top Resa show in Paris, France, September 20, 2016. REUTERS/Jacky Naegelen