Air France in Financial Trouble?

Air France, the French flag carrier and a founding member of the SkyTeam alliance, could be in serious financial trouble. The airline’s CEO resigned last week amid an ongoing industrial dispute, sending the share price plummeting. Meanwhile, the French government says the airline’s future is in the balance, vowing not to bail out the airline. So, just how bad is the situation at Air France?

Air France has lost millions of Euros and its reputation as a reliable airline is in tatters due to ongoing strikes. Yesterday marked the fifteenth day in this year alone that strikes have taken place at Air France. 18% of the airline’s cabin crew and 14% of pilots walked off the job. Yesterday’s strike resulted in the cancellation of almost 20% of flights, although most of these were short-haul flights. These strikes are costing Air France around €25 million ($40 million) per day.

Jean-Marc Janaillac, CEO of the Air France-KLM Group resigned last week after the airline’s workforce rejected a new pay deal. The shock announcement caused the airline’s share price to plunge by almost 13%.

As the strikes continue, France’s economy minister Bruno Le Maire has warned that the government will not bail out the airline. The French state owns a 14.3% stake in Air France-KLM. Le Maire warned that “the survival of Air France is in the balance… Air France will disappear if it does not make the necessary efforts to be competitive.”

The strong words have prompted speculation that Air France may not even survive another year. Europe already lost Airberlin last year after it went bankrupt. But is Air France really at risk of disappearing? The short answer is “no”. Dutch-based KLM is currently performing well, and the Air France-KLM group is still profitable as a whole. In any case, as one AFF member rightly points out, the economy minister’s comments need to be taken with a grain of salt.

I don’t think their demise is that imminent, and the ministers statement should be taken in the context of an ongoing industrial dispute. However all is not well at Air France.

Rail employees and many other French workers are also currently striking in response to French government attempts to reform the labour market. So the problem of ongoing strikes is not unique in France to its national airline.

Spooked by ongoing flight cancellations and the possibility of the airline’s collapse, some AFF members have decided to rebook their upcoming Air France flights with another airline.

We rebooked Air France flights last week for June as you just never now. We got totally caught out with Ansett.

The problems at Air France are not dissimilar to those that were facing Qantas earlier in this decade. In Qantas’ case, CEO Alan Joyce managed to successfully turn the airline’s fortunes around.

I remember another airline whose financial situation was apparently quite poor, and some even suggested their demise was imminent, they took drastic industrial measures and were appealing to government for help (legislative change). They managed their way out.

Join the discussion on the Australian Frequent Flyer forum: Air France future in balance

Matt Graham

The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 70 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can connect with Matt by posting on the Australian Frequent Flyer community forum and tagging @AFF Editor.