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"A Bigger Crisis Than September 11"

Just when air traffic was starting to pick up following September 11 and the economic downturn, the weaker U.S. dollar has left airlines coping with yet another uncertainty. Air France has fared better than most, thanks in part to the financial troubles of several key rivals and a reduced schedule that takes it to only 12 U.S. destinations.

Still, other challenges remain. BusinessWeek Associate Editor Diane Brady met with Christopher Korenke, vice-president and general manager of Air France USA, to discuss issues ranging from the differences between American and European CEOs to the U.S. stock market. Here are edited excerpts of their conversation:

Q: Are you starting to see any impact from the weakening dollar?

A: At the moment, we're in the middle of the high season, so demand is strong. If the dollar continues to go down relative to the euro, it could have an impact later on. I'm sure there will be more Europeans wanting to come to the U.S., but overall, travel is weaker.

Let's face it: The euro isn't climbing because things have improved in Europe. It's because of worries about the U.S. economy and American capitalism. In terms of the stock market, we have a bigger crisis than September 11. It's terrible.

Q: Why are things so bad?

A: A lot of investors are focused on short-term gains instead of the basics and the long-term picture. To be so focused on quarterly results -- so focused on the short term -- is a problem. You don't do investments for a quarter. You don't do developments for a quarter. It's hard to plan ahead when you're focused on short-term results.

Q: Are there differences between U.S. and European corporate leaders?

A: Most definitely, there is a huge difference. American leaders make much more money. It's a different standard. I would personally never pay $1,000 for a bottle of wine because I don't think there could be enough pleasure in the wine to pay that amount of money. So, for me, there has to be a cap on how much I pay for wine. When I hear about people, because of stock options, making $180 million a year, it seems too much to me. It's a very European point of view, but why should I hide it?

Q: One accusation against Jean-Marie Messier [former CEO of Vivendi Universal] was that he acted too much like an American.

A: I don't want to comment specifically on Messier, but it's true that the styles are very different. French CEOs don't generally seek public exposure. You don't go to the media. You don't ask photographers to take pictures of your living room or of you cooking something.

In Europe, the CEO doesn't have to be a rock star. You want to get good pay for your job, and you want to do a good job, but that is enough. You may want a spotlight on your company -- but you don't need to mix up your private life.

The U.S. corporate culture is also based on more of a military model, with a stricter hierarchy. They like clear definitions and solutions. Europeans like to have things less defined. The boundaries are a little more blurred. You can't say that one way is right and one way is wrong. It's not black and white.

Q: Did September 11 have a big impact on your business?

A: The industry is much wiser than it was 10 years ago, during the [Persian] Gulf War. Then, people kept up the schedules and cut the price. This time, we all tried to maintain the yield by cutting back capacity. We cut capacity to North America 13.9% for the summer season. We closed one route, to Dallas-Fort Worth. And we dropped service to the East Coast to once daily.

Instead of increasing all service on Apr. 1, we built up to more service as demand increased. American carriers have been doing that for years, but the Europeans were always used to having a winter schedule and a summer schedule. So the recovery has been much faster for us.

Q: Your SkyTeam alliance with Delta Air Lines won antitrust immunity in January. What impact will that have?

A: You don't see a short-term immediate impact, but it will be very beneficial over the long term. We can tap into the Delta hubs in places like Cincinnati and New York's JFK airport. We plan to reinforce the points where they're already strong.

There are challenges when you try to mix cultures, of course, and we're working on that. We have to be more international. They have to make some changes, too. I look at DaimlerChrysler. It's always a challenge.

Q: The European Commission has told Air France and Alitalia that it has "serious doubts" a proposed cooperation agreement will hold up. What do you think?

A: We will have to see what they ask for. They may ask both companies to open up a couple of slots to a third party.... The problem is sometimes it's hard to find a third party that wants to take those routes. European regulators are very tough. Sometimes they are tougher than the American regulators. We may have to make changes, but that doesn't mean the deal won't [hold up].

Q: The French government has indicated it wants to privatize the rest of Air France. Is that likely?

A: I really only know what I have read in the press, but I think it will definitely happen. The government needs money to help deliver on some of its promises, and once you have some public ownership, it changes the way things are done.... And even though we may still have some state ownership, we've managed to outperform a lot of other airlines. The makeup of our ownership hasn't affected our performance.

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