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Air France gives rise to fear of grounding

Air France employees founded the Tous Air France group on Wednesday to resume the dialogue within the French airline. Because the airline is in a deep crisis. The stock price for the current 8.60 Swiss franc collapsed in a month by 18 percent. President Jean-Marc Janaillac will resign. Earlier his crisis management plan was rejected. In addition, there are about two weeks strike led by unions, which requires a general wage increase of more than 5 percent.

EUR 300 million lost

Before May 15th, the General Assembly of the Air France-KLM Group talks quietly. The strikes have cost the company about 300 million euros so far. At the moment nobody knows how to take the airline out of this hole. Not even Bruno Lemaire, the French Minister for Economic Affairs.

However, he does not exclude any financial rescue from the French state, which owns 1

4 percent of the shares in Air France-KLM and thus majority shareholder. "If Air France does not do the necessary competitiveness, it will disappear," he warned on Twitter. Does the French airline crash? In a highly competitive sector, an airline's bankruptcy is no longer taboo, as Air Berlin has shown.

Everything is possible

The situation does not differ from that of Swissair, whose foundation on October 2, 2001 is still on everyone's lips. At least in respect of Jean-Pierre Jobin, who was then the Director General of Geneva International Airport on the day when the entire airline of the national airline was down in lack of liquidity. "At that time, no one could imagine that Swissair could go bankrupt," reminds the aerospace enthusiast. And yet it happened. "That's why everything is possible, even for Air France."

However, there are differences in Swissair and Air France: First, Swissair was in serious financial difficulties. "The company lost 3 million francs a day – for a year and a half," says Jean-Pierre Jobin. On the other hand, Air France has achieved good results. The Air France-KLM Group, which carries 100 million passengers annually, achieved a 42% increase in profits in 2017. However, in the Group, the two companies are not the same: Air France's sales are higher than the Dutch airline, but the profit is lower: 588 million euro 2017, compared to EUR 910 million for KLM. Even considering the debt holdings, which amounted to 1.66 billion in 2017, Air France's financial situation is so far better than that of Swissair at that time.

The second difference is from the business point of view: Swissair's failure is largely due to management errors, including expensive international investments. Again, there is no resemblance to Air France, which has not spread its business dangerously. All experts agree that operating costs are too high. The result is therefore bad. It is important to pay off.

Political threat

In this context of political refurbishment, a potential foundation is seen as a threat to the Group's managers in order to increase the pressure on employees. In Switzerland, grounding was also used for political purposes, says Jean-Pierre Jobin. "In view of the Bundesrat's refusal to fall in his pocket, the former Swiss boss Mario Corti let the situation degenerate. The plane on the ground was enough to wake Bern. "

Andreas Wittmer, economist at St. Gallen University and a specialist in this area, points out that the aviation industry is no longer profitable – margins are scarcely 1 to 2 percent." The competition is tough and passengers are no longer willing to pay expensive . "It is absurd to leave the captains wages at around 300,000 euros a year – as is the case with Air France, but also with Lufthansa.

The expert earned the foundation for Swissair, primarily to lower the cost of the company." If the airline went in bankruptcy, they could all cook and start over. "The salary would be reduced by 40 percent and no one would complain because everyone is happy to have a job." A radical solution to escape labor law obligations or strikes.

This article was first published by Le Temps under the title Air France fait crainder le grounding.

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