May 15, 2018 / 11:36 AM / 2 years ago

Triumvirate to run strike-hit Air France-KLM for now after pay row

PARIS/BERLIN (Reuters) - Air France-KLM (AIRF.PA) installed a triumvirate of executives led by its finance chief to run the strike-hit airline while it searches for a new CEO, following a standoff over staff pay.

FILE PHOTO: The empty podium is seen after Jean-Marc Janaillac, Chief Executive Officer of Air France-KLM Group, attended a news conference to announce his resignation in Paris, France, May 4, 2018. REUTERS/Charles Platiau

Tuesday’s move is designed to fill a gap left by the abrupt departure of chief executive Jean-Marc Janaillac after Air France staff earlier this month rejected a pay proposal aimed at ending a series of strikes that have resulted in heavy losses.

In a statement ahead of an annual shareholder meeting, Air France-KLM said the new three-person executive committee would comprise group Finance Director Frederic Gagey, who would take on the role of chief executive, and the existing heads of the two national brands that merged in 2004: Air France and KLM.

Shares in the group dropped after the announcement and were down 3.3 percent at 1344 GMT.

Bernstein analysts said in a note that while the move provides some stability, a formal successor was still required.

“Whoever that person is will face significant challenges throughout the business, from competitive threats in AF KLM’s key markets, an emboldened union in France which is likely to ramp up its demands and the lack of a coherent long-term strategy,” they wrote.

Air France-KLM also named board member Anne-Marie Couderc as non-executive chairwoman.

“This transitional governance structure is established for the shortest-possible period required to effectively complete the succession process for the roles vacated by Jean-Marc Janaillac,” the company said in a statement.

The interim leadership of Europe’s second-largest network carrier by revenue will face French unions emboldened by the exit of Janaillac, who announced his resignation on May 4 after putting his job on the line as French staff voted on pay.

The French government, already locked in a battle over reforms at state railway operator SNCF, has said it will not bail out Air France - where a protracted dispute between management and unions over pay has resulted in 15 days of walkouts this year, costing the group 400 million euros ($479 million).

On Tuesday, an adviser to President Emmanuel Macron said the French government had no plans to reduce its 14.3 percent stake in Air France-KLM, but may not maintain this level forever.

In a sign that the board is ready to hold the line over the labor dispute at Air France, the statement said the French subsidiary’s chief executive, Franck Terner, would not have a mandate to take any decisions that would jeopardize the growth strategy already approved by the board.

“The board is aware of the difficulties currently being traversed by Air France and requested to be kept regularly informed of the company’s labor situation,” it said.

Terner and KLM counterpart Pieter Elbers will remain in their posts and sit inside the top triumvirate alongside Gagey.

“It is important that, throughout the group, we restore the good spirit, cohesion, and stability that we had in the early days of our partnership,” Elbers said in a statement.

Speaking at the AGM, outgoing CEO Janaillac said the group had to work on that cohesion, plus improve its profit margins, which are below that of rivals.

“We have to be strong to capture growth in this industry. If we do not grow as fast as rivals, then we will lose ground,” Janaillac said on his final day at the company.

Reporting by Cyril Altmeyer, Victoria Bryan, Editing by Tim Hepher/Richard Lough/Susan Fenton

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