Daily Management Review

Weeklong strike deprived Air France of € 90 million


Strike of Air France’s flight attendants, which lasted from July 27 to August 2, brought losses of € 90 million to the airline. This was told by President and CEO of Air France Frédéric Gagey in an interview with news radio station France Info.

Mathieu Marquer
Mathieu Marquer
"I think that end losses will amount to approximately EUR 90 million. That's a pretty significant amount of money. In fact, it is the cost of a long-haul aircraft. In addition to the financial losses, the conflict has damaged the image of Air France’s personnel. It is obvious that the incurred losses will negatively affect financial results of Air France, but we expect that the company will have a positive operating result for the 2016, just like in the last year". 

The weeklong strike lasted July 27 to August 2 was called by two French Pilots Union, SNPNC-FO and UNSA-PNC. The organizations urged their members to protest against renewal of an agreement according to which Air France is free to independently establish rules of work, pay and promotion of flight attendants.

In addition, employees and management of the airline had disagreements about timing of new contracts. Air France wants tenancy of a new contract with employees to be 17 months. The trade unions demand to increase the term of new contracts up to three years.

Over the past few years, employees and top management of Air France have kept rather strained relations.

So, in 2015 trade unionists had a meeting with Director of Air France in Orly Pierre Plissonnier and Air France Human Resources Director Xavier Broseta, after which the representatives of top management lost most of their clothes.

Air France-KLM is concerned not only about its relations with employees. The company fears that threat of terrorist attacks would reduce passengers inflow to France and have negative impact on its financial situation in the second half of the year. This is stated in the quarterly report that the Franco-Dutch airline introduced a day after another tragedy, the murder of a priest in northern France.

Results in the second quarter were better than expected. Airline revenue decreased by 5% yoy to € 6.2 billion, yet the pre-tax profit jumped 138% to 317 million euros thanks to cheap fuel. So, shares of Air France-KLM at the Paris stock exchange rose by 3%.

Other European airlines also feel consequences of the terrorist attacks, attempted military coup in Turkey, and uncertainty caused by the UK’s decision to leave the European Union.

Net profit of the largest German airline Lufthansa in the first half fell more than twice to EU 429 million, compared to last year's EU 954 million. The company said that it is planning to focus on cutting costs in a situation where demand for air transport has suffered because of the terrorist attacks in Europe.

Operating profit excluding exceptional items for the first half increased by 13% to EU 529 million. However, in July, Lufthansa said it expects a decline in operating profit instead of the previously projected growth. The worsening forecasts were obliged to terrorist attacks and the growing political and economic uncertainty.

The company’s CEO Carsten Spohr warned that the aviation sector should get prepared for a difficult second half of the year. CFO Simone Menne added that customers from Asia and the United States are massively cancelling orders.

AIG, which owns British Airways, in turn, noted that demand for air travel in the corporate sector remains weak. The company attributes this to the Brexit decision. 

source: reuters.com, franceinfo.fr

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