Air France shares nosedive after CEO bails

Air France boss Jean Marc Janaillac announces he will resign on Friday                  REUTERS  Charles Platiau

Air France boss Jean Marc Janaillac announces he will resign on Friday REUTERS Charles Platiau

Air France-KLM Group is facing its biggest crisis in years as Chief Executive Officer Jean-Marc Janaillac prepares to quit amid a deepening labour conflict that the French government has warned is threatening its very survival.

While airlines from Deutsche Lufthansa AG to British Airways - and lately even low-priced specialist Ryanair Holdings Plc - have all had their share of corporate dysfunction brought on by strikes, none has suffered to the extent as Air France.

Air France-KLM boss Jean-Marc Janaillac announced his resignation Friday after staff at the carrier's French operations rejected a pay deal aimed at ending months of walkouts.

The offer was open until 4 May, but did not receive the number of signatures required for it to be implemented.

By 1455 BST, Air France shares were 9.91% lower at €7.29.

Labor unions have scheduled more strikes, leading the French airline to warn that it would cancel about 15% of its flights on Monday.

Air France-KLM posted a first quarter operating loss of €118 million ($141 million) last week, attributing €75 million of that loss to the strike impact.

"The company is making every effort to minimise the inconvenience they could cause to its customers".

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Le Maire also warned that the state - which owns 14.3 percent of the group - would not serve as a backstop.

"I call on everyone to be responsible: crew, ground staff, and pilots who are asking for unjustified pay hikes", Economy Minister Bruno Le Maire told the BFM news channel.

"The future looks turbulent for the company", said Gregoire Laverne, fund manager at Roche Brune Asset Management, who sold his Air France-KLM shares in September 2017.

Air France-KLM shares are down nearly 50 per cent since the start of 2018, versus a 3.7 per cent gain on the broader Paris SBF-120 index and a 4 per cent fall on the pan-European STOXX 600 Travel & Leisure index.

"KLM might (rightfully) ask why the profits are being generated in the Netherlands but the losses being made in France", they said.

French unions have complained the company's management is not serious about negotiations.

In the wake of the rejection of Janaillac's pay deal to Air France staff, a two-day strike over May 7 and 8 has gone ahead.

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