More Strikes Loom at Air France-KLM, Shares Plummet

Aug 17, 2018

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Air France-KLM shares fell by 4% Friday, just one day after the flag carrier of France announced the appointment of new CEO Benjamin Smith. Economists are attributing the stock drop to the airline’s employee unions which responded with open hostility over the decision to appoint Smith, a Canadian, who would be the first non-French person to lead the airline. (It now includes Dutch flag carrier KLM.)

“Driving the share price is essentially the discontent of the unions,” said Meriem Mokdad, fund manager at Paris-based Roche-Brune Asset Management.

Air France has already been plagued with a series of strikes that began in early February, and which have cost the airline more than $380 million, with shares down by 36% since the beginning of the year.

Although French bank Société Générale maintained its “sell” recommendation on Air France-KLM shares, it welcomed Smith’s appointment on the basis of his success at Air Canada. He “played a key role in Air Canada’s growth and modernization strategy in recent years, redefined AC’s hub strategy and was also a driving force behind AC’s successful low-cost brand Rouge,” SocGen wrote in a research note titled “New CEO – New Solutions to Old Problems.” The bank further noted that the previous CEO of Air France had met with similar union resistance two years ago when he took up the leadership mantle, and cautioned Air France employees to proceed more cautiously this time. “We hope that history won’t repeat itself — otherwise having a non-French CEO will be the least of the group’s and the (French) employees’ worries.”

French workers, who will discuss another round of strike action on August 27, aren’t the only unhappy employees: Dutch pilots, under the KLM arm of the group, threatened to strike over working conditions as well. On August 13, KLM released a statement saying that “Regrettably, negotiations are in a difficult phase” with Dutch Airline Pilots Association VNV over “desired reduction in work pressure and improvement of the work-life balance of pilots.” VNV has threatened to strike in as soon as four weeks if the pilots’ requests are not met, and has demanded that KLM hire new flight personnel as soon as possible in order to allow pilots more time off between flights. However, KLM stated that, although the airline has already begun recruiting new pilots, it cannot meet all of the pilots’ demands.

Air France and KLM formed the “first major cross-border airline merger” in 2003, although the two airlines have always maintained independent operations. While KLM had been struggling at the time of the merger, the Dutch airline has been more successful at cutting costs in the 15 years since. KLM recently was able to negotiate several cost-cutting deals with employees which have bolstered the airline’s profitability, putting the carrier in a stronger position than its French counterpart.

“Our pilots have given up a lot in recent years, making KLM profitable”, VNV spokesman Joost van Doesburg said. “Now it’s time for KLM to deal with its exhausted staff.”

Featured image courtesy of KLM

Bank of America® Premium Rewards® Visa® credit card

This card from Bank of America gets really interesting if you have a BofA checking, savings or investment account. Depending on the value of your combined accounts you can potentially get as much as 3.5x points on travel/dining and 2.625x points on other purchases making it the richest consumer banking bonus out there.

Apply Now
More Things to Know
  • Receive 50,000 bonus points – a $500 value – after you make at least $3,000 in purchases in the first 90 days of account opening
  • Earn unlimited 2 points for every $1 spent on travel and dining purchases and unlimited 1.5 points per $1 spent on all other purchases
  • If you're a Bank of America Preferred Rewards member, you can earn 25%-75% more points on every purchase
  • No limit to the points you can earn and your points don't expire
  • Redeem for cash back as a statement credit, deposit into eligible Bank of America® accounts, credit to eligible Merrill accounts, or gift cards or purchases at the Bank of America Travel Center
  • Get up to $200 in combined airline incidental and airport expedited screening statement credits + valuable travel insurance protections
  • No Foreign Transaction Fees
  • Low $95 annual fee
Intro APR on Purchases
Regular APR
17.74% - 24.74% Variable APR on purchases and balance transfers
Annual Fee
Balance Transfer Fee
Either $10 or 3% of the amount of each transaction, whichever is greater.
Recommended Credit

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.