August 16, 2018 / 1:29 PM / 10 months ago

UPDATE 1-France backs Canadian for Air France-KLM CEO job as board meets

* Smith would be first foreign Air France boss in 85 yrs

* French state will support Smith’s appointment-finmin

* Unions say to discuss strike action Aug. 27 (Recasts with French state backing Smith to be CEO, details)

By Laurence Frost and Richard Lough

PARIS, Aug 16 (Reuters) - Air France-KLM was poised to appoint Benjamin Smith as its new chief executive on Thursday, after the French government backed the Air Canada second-in-command over union objections.

Smith, 46, would become the first foreign boss in Air France’s 85-year history, at a time when it faces industrial action that has already wiped 335 million euros ($381 million) off first-half earnings.

The French state, which commands a 14.3 percent stake in the airline and a larger share of voting rights, will support Smith’s appointment at a board meeting later in the day, Finance Minister Bruno Le Maire said.

A spokesman for the airline group declined to comment on the meeting or the succession process - triggered by the May resignation of its last CEO Jean-Marc Janaillac following months of strikes and a staff vote against his final pay offer.

Air France workers’ representatives criticised his expected nomination, first reported by French daily Liberation earlier in the week, in a statement issued by nine major unions representing pilots, cabin crew and ground staff.

“The choice of candidate should further the defence of our national airline’s interests,” the unions said - also invoking a surge in U.S. protectionism under President Donald Trump among reasons why a foreign CEO appointment should be “inconceivable”.

Unions are to discuss another round of strike action on Aug. 27, when Smith’s reported 3.3 million-euro salary - if confirmed - could further fan the flames.

But alliance partners Delta Air Lines and China Eastern, which each hold 8.8 percent of Air France-KLM, pushed for the hiring of a seasoned international airline executive, people with knowledge of the process have said.

In a departure from precedent, French President Emmanuel Macron’s government appears to have backed that stance.

“We’ve always said we wanted a leader for Air France with a deep knowledge of aviation,” Le Maire said during a visit to southwest France, in comments sent to Reuters by his office.

The Air Canada veteran “meets all the conditions set by the state as shareholder”, he added.

Known to speak French, Smith has a strong track record in labour dealings at Air Canada, where in 2015 he led successful negotiations on a 10-year wage agreement.

Still, he may face a stiffer challenge in renegotiating Air France labour deals to cut costs, aviation experts warn.

“It’s going to be a tough job,” said James Halstead, a consultant at UK-based Aviation Strategy.

“British Airways went through this nearly 20 years ago, Lufthansa ... finally came to a reasonable Germanic compromise in the last few years,” he said. “Air France has not been able to do it.”

$1 = 0.8787 euros Reporting by Laurence Frost and Richard Lough Additional reporting by Sudip Kar-Gupta, Simon Carraud and Gilles Guillaume; Editing by Emelia Sithole-Matarise

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