Bloomberg News

Air France to Operate 90% of Flights as Support for Strike Wanes

November 02, 2011

Nov. 1 (Bloomberg) -- Air France aims to operate at least 90 percent of flights today after support for a five-day cabin crew strike was hurt by labor deals that left the action backed by only four of the seven unions representing the 15,000 crew.

The CFTC and CFDT labor groups reached an agreement with Air France yesterday, when the carrier scrapped fewer than 10 percent of its more than 1,000 scheduled flights, joining the largest flight-attendant union, UNAC, in spurning the walkout.

Cabin crew aiming to overturn cuts to staffing levels on single-aisle jets are in the fourth day of an action spanning the All Saints Day holiday that’s one of France’s busiest. Air France is seeking to reduce costs after an earnings slump forced the exit of Pierre-Henri Gourgeon as chief executive officer.

“It’s extremely important for the carrier to get to grips with headwinds coming from the unions,” said Frank Skodzik, an analyst at Commerzbank AG in Frankfurt with a “hold” rating on Air France-KLM stock. “Obviously, it has come at a very bad time with the public holiday, but in the longer term the damage to the brand and the share price is usually quite limited.”

Air France has tried to restrict terminations to high- frequency European routes where it’s easier to rebook seats. Today’s long-haul cancellations are confined to Paris flights to Abu Dhabi, Atlanta, Montreal and New York John F. Kennedy.

U.S. services have been halted because passengers can usually be accommodated with partner Delta Air Lines Ltd.

Shares Extend Fall

Air France-KLM Group, Europe’s biggest carrier, fell as much as 4.6 percent to 52.69 euros in Paris, where it is based, and was trading at that price as of 10 a.m. local time, valuing the business at 1.58 billion euros ($2.17 billion).

The stock declined 6.9 percent yesterday and has tumbled 60 percent this year, the worst performance on the six-member Bloomberg EMEA Airlines Index, which is down 35 percent.

The Paris airports of Orly and Charles de Gaulle, Europe’s second busiest, and the terminal in Marseille are among those affected by the strike, which was prompted by Air France’s plans to cut a flight attendant from each of its Airbus SAS A319 jets, leaving three. The carrier says it has agreed to keep the number at four for trips over three hours and has also given ground on an issue regarding performance assessment.

Air France-KLM reported operating losses in two of the past three fiscal years following 11 years of profitability and is targeting nothing more than breakeven for 2011. Its reputation also took a hit after safety experts said pilot training was a factor in a 2009 crash that killed 228 people, a factor that spurred the reinstatement of Jean-Cyril Spinetta as CEO.

International Air Transport Association figures published yesterday show that global passenger traffic grew 5.6 percent last month, accelerating from a 4.6 percent gain in August, in what CEO Tony Tyler said was “a pleasant surprise.”

IATA said it’s still expecting a “general weakening” in coming months, with a continuing slump in freight traffic, which deepened to 2.7 percent in September from 2.4 percent in August, indicating the likely future trend for the passenger sector.

--With assistance from Vidya Root in Paris and Alex Webb in Frankfurt. Editors: Chris Jasper, Chad Thomas.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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