Air France-KLM union tensions surface in bailout's wake

PARIS/AMSTERDAM (Reuters) - Air France-KLM's AIRF.PA French unions on Monday criticised calls by their Dutch counterparts for KLM to be given greater autonomy, amid signs that a multibillion-euro coronavirus bailout is increasing tensions within the airline group.

FILE PHOTO: Logo of Air France KLM Group is pictured on the first Air France airliner's Airbus A350 during a ceremony at the aircraft builder's headquarters of Airbus in Colomiers near Toulouse, France, September 27, 2019. REUTERS/Regis Duvignau/File Photo

“It’s an illusion to think KLM would fare better without Air France,” the French carrier’s unions said in an open letter responding to comments last week by Dario Fucci, head of the KLM works council.

France agreed last month to issue or guarantee 7 billion euros ($7.6 billion) in loans to Air France, with another 2-4 billion pledged to KLM by the Dutch government.

But the rescue package, designed to see the group through the virus pandemic that has crippled the global airline sector, also stoked concern in the Netherlands over possible French nationalisation in a later capital increase.

The French and Dutch governments each own close to 14% of Air France-KLM, which declined to comment on the exchange of barbs between its unions.

In Dutch media interviews, the KLM union chief suggested the relationship between the airlines and the combined Air France-KLM holding company should be loosened in response to the “exploding” debt on the Air France side.

“The prenuptial agreement will have to change,” Fucci was quoted as saying in De Telegraaf newspaper. “We want to buy fuel and sell tickets together, but that’s the end of it.”

The response from Air France colleagues was backed by nine of their unions including the main SNPL pilots’ grouping.

“When Air France bought KLM in 2004, KLM was nearly bankrupt,” their open letter said on Monday.

Since then, it added, “KLM has experienced exponential growth, taking full advantage of access to the French market, which ... remains one of the largest, most attractive and most lucrative in the world.”

The riposte came as Dutch lawmakers were preparing on Tuesday to discuss government plans to contribute up to 4 billion euros in direct and state-guaranteed loans for KLM.

The bailout was announced after Air France-KLM Chief Executive Ben Smith, who has pushed in vain for closer integration between the two airlines, gave up his 2020 bonus under Dutch government pressure.

Reporting by Laurence Frost, editing by Pritha Sarkar