Is Air France KLM on the Brink of Collapse?

Is Air France KLM on the Brink of Collapse?

Shares in Air France KLM plunge 14% Monday as staff go on strike and its Chief Executive quits.

Trouble is brewing for Air France KLM as industrial action continues with staff looking for a 5.1% pay rise – something the airline vehemently keeps rejecting.

The European carrier is loss-making as it is, and things didn’t get any better on Sunday when the french economy minister, Bruno Le Maire, went on television to say that the viabiity of the whole airline is at risk.

On BFM TV, he said; “I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes.

“Air France will disappear if it does not make the necessary efforts to be competitive.

“The survival of Air France is in the balance.”

Le Maire also went on to say that the French Government would not come to the ailing carrier’s rescue should it run out of money. In the first quarter of 2018, the airline declared a loss of £238m.

Where Next Then for Air France KLM?

The trouble at Air France is seen as a test of President Emmanuel Macron’s leadership, particularly in labour disputes. His new labour reforms have brought an end to automatic above-inflation annual pay rises for public sector workers.

Macron is keen to be seen at home and abroad as a strong domestic leader.  His reform agenda and standing up to Unions was a focus of his election campaign last year.

There is recent European history behind this, and a possibility that lessons haven’t been learned from the past.

Macron seems to be behaving very much like former Conservative Prime Minister Margaret Thatcher did in the 1980’s – standing off against the Unions and public sector workers.

The coming weeks will see whether his stance pays off. Strikes are set to intensify at Air France KLM, at French rail operator SNCF, and refuse collectors.

France appears destined for a long and painful ‘Summer of Discontent’.