While Air France continues to strike and lose money, KLM is growing angrier by the day. Is the marriage in jeopardy?
An unnamed source told Bloomberg that KLM is exasperated and is now looking at retooling management structure to appoint a deputy CEO from the KLM side. The 2004 merger between Air France and KLM calls for a French CEO and Dutch deputy, but the the deputy position has remained vacant for the last four years.
The problem is deeper than a seat at the table, though. It’s one of numbers. While Air France-KLM expects to be profitable for the year, KLM is propping up Air France. Air France lost $211MN in the first quarter while KLM reported $60MN in profit. This KLM profit came from only two-thirds of the revenue of Air France.
Air France employees have organized 15 strikes since February, which will translate to over $300MN in lost profit for the year. Meanwhile, KLM pilots have not struck since 1995 and KLM cabin crew have struck…for one day…over Amsterdam expansion issues, not wages.
But the Dutch side is not alone in its anger. The French government owns 14% of Air France and is both angry and embarrassed. The Emmanuel Macron government has clearly warned that it will not bail out Air France. Macron may even support Pieter Elbers, the current KLM Chief Executive, as the new Group Chief of Air France-KLM.
Elbers told a Dutch TV station over the weekend that divorce was not the answer.
We have accomplished a lot together and not everything is reflected in the balance sheet.
Yet change is inevitable. The Dutch side of the company will soon have a more powerful voice at the table whether in the form of the CEO of the group or in a deputy role.
Whatever your view on the labor situation at Air France, the status quo is not sustainable. The strikes aside, high built-in costs have made Air France uncompetitive both on a longhaul and shorthaul basis within Europe. While British Airways and Lufthansa have adapted, Air France has not. Change is coming, whether the labor unions at Air France continue to resist the inevitable or not.