Turbulence on market for troubled Air France
Air France-KLM Group shares tumbled in Paris trading as Europe's biggest airline battles turbulence triggered by CEO Jean-Marc Janaillac's resignation and a deepening labour conflict.
The stock dropped as much as 14pc, the most since 2002. Even before yesterday, the shares had lost 40pc in value this year, making it the worst performer on the 26-member Bloomberg World Airlines Index.
The carrier was thrown into disarray on Friday when Mr Janaillac said he planned to submit his resignation to the board on May 9 after workers rejected his final wage offer - an outcome that even caught some unions by surprise.
Yet their defiance continued yesterday as another two-day strike got underway and the airline scrapped about 15pc of services. Air France-KLM has already warned the labour action that started in February will wipe out at least €300m in operating profit this year.
While the airline maintained almost all long-haul flights during the latest walkout, it was forced to cancel one in five medium-haul services yesterday from Charles de Gaulle airport in Paris and short-haul trips from Orly were also affected. Further disruptions are predicted today as the industrial action is scheduled to continue.
Mr Janaillac, who has been at his post less than two years, used a less confrontational approach than his predecessor Alexandre de Juniac. Analysts have compared a rejection of management's pay proposal by workers to "pressing the self destruct button". Shares fell as much as 14pc, the most since September 30, 2002, and were trading down 10.5pc to €7.24 at 11.51am in Paris, giving a market value of €3.1bn.
Mr Janaillac has the backing of the French government as President Emmanuel Macron tries to overhaul his country's economy by liberalising labour laws and cutting taxes on capital. Future projects also include changes to jobless benefits. He's also in a tug-of-war with unions over a plan to overhaul the SNCF national railway, which has triggered a series of strikes.
French Finance Minister Bruno Le Maire said on Sunday the Air France workers' demands were unjustified, urging them to show "responsibility" and saying taxpayers won't bail the company out.
While airlines from Lufthansa to British Airways - and lately even Ryanair have all had their share of corporate woes brought on by strikes, none has suffered to the extent as Air France. A simmering conflict exploded into open carnage in late 2015, when two of the airline's executives were physically assaulted by enraged workers, forcing them to flee and scale an industrial fence, their business suits and shirts ripped to shreds.
Mr Janaillac had put his job on the line, holding an online consultation on the pay offer.
He lost his gamble when 55pc of staff unexpectedly rejected the proposal, which was for a 7pc increase over four years. Air France has had 13 days of labour action by pilots, cabin crew and ground staff since February. (Bloomberg)