Smith has a base salary of 900,000 euros ($1 million), but he can earn as much as 4.25 million euros if performance targets are met.
"I have already made a personal investment by moving with my family to France," Smith said in a video message to staff. "Today I have decided to make another investment by investing half my fixed salary in Air France-KLM's share capital."
Smith is pledging half of his fixed salary, meaning 450,000 euros (~$525,000).
"It's a way of demonstrating my confidence in our future success," Smith added. "I'm investing because I believe we can win in our market and become number one, but I also want to show my commitment."
Smith's appointment as CEO of the joint group comes at a tough point financially. In the first half of the year, 12 days of strikes resulted in 335 million euros in losses. The series of employee strikes, which caused Smith's predecessor Jean-Marc Janaillac's resignation, are at the forefront of issues that Smith is faced with combatting.
According to people familiar with the matter, Smith spent his first day on the job by meeting staff at the company's headquarters and at its Paris (CDG) hub. In addition, Smith took the first step in softening the relationship by meeting with unions, including the pilots' union.
"We operate in a fiercely competitive global marketplace," Smith said in the video to employees. "We need to act, we need to adapt, and we need to be prepared for both, but remember that I'm not here to do this on the backs of any of you."
Smith, who has been credited with helping Air Canada expand its international reach to more than 200 destinations, also has previous negotiation experience with pilot and flight attendant unions, which led to long-term labor deals.
