Air France CEO Wanted: Must Relish a Fight, Pay Terrible

Air France-KLM Group Chief Executive Officer Alexandre de Juniac Attends Hop! News Conference

Alexandre de Juniac.

Photographer: Christophe Morin/Bloomberg
  • Successor will be plunged into union spat that defeated Juniac
  • State likely to favor candidate with public-service background

Alexandre de Juniac’s exit as chief executive officer of Air France-KLM Group leaves the company with the unenviable task of finding a successor prepared to face down unions in one of Europe’s bitterest labor disputes while offering little in way of enticement.

News of De Juniac’s planned departure, which emerged Tuesday after three years of clashes with workers and only lukewarm support from the company’s 15.9 percent state shareholder, wrong-footed Europe’s biggest carrier and forced it to hire a recruitment headhunter.

The CEO did little to sweeten the pill at his first public appearance since the exit plan was revealed, saying Thursday in Paris that Air France-KLM is trailing badly in a “race led by giants,” and recalling as his darkest hour a 10-day strike in 2014 he described as “a frontal attack” on the company’s reputation.

Not only must De Juniac’s replacement renew hostilities with labor groups to force through cost cuts analysts say are vital if Air France-KLM is to survive the challenge of discount rivals in Europe and Gulf carriers in the long-haul market, they must do so on a salary that’s small by private-sector standards.

IATA-Bound

De Juniac, who will leave by Aug. 1 to run the International Air Transport Association lobby group, was paid 675,000 euros ($768,000) in 2014, the most recent year for which Air France-KLM has published numbers.

In the same year, Richard Anderson, CEO of the company’s U.S. ally Delta Air Lines Inc., received $17.6 million. Carsten Spohr, who heads Germany’s Deutsche Lufthansa AG, itself beset by labor strife, got 2.67 million euros in 2015, including 1.2 million euros in base pay.

IATA doesn’t publish pay figures, according to spokesman Tony Concil, who said salaries are negotiated between a prospective CEO and its board.

Even if Air France and government decided to seek a non-French successor, the remuneration gap, a consequence of caps tied to the company’s partial state ownership, would probably put most major industry figures out of the running.

Casting Vote

“The salary limits hiring possibilities and makes foreign recruitment almost impossible,” said Christine Alibert, president of the Paris branch of executive-search firm Boyden. The modest pay and need to understand and manage relations with unions and government means De Juniac will most likely be replaced by someone from within the elite of French public service, she said.

That’s already a well-worn path at Air France-KLM, with De Juniac himself a former chief of staff to International Monetary Fund Managing Director Christine Lagarde when she was French finance minister under President Nicolas Sarkozy, as well as an adviser to her successor, Francois Baroin.

France’s Socialist government may insist on making the ultimate choice after Air France got its way over the appointment of De Juniac, associated with the French right because of his links to Sarkozy, in 2013, a year after Francois Hollande had been elected president.

Among internal candidates, Frederic Gagey, who heads the Air France unit from which De Juniac himself was promoted, has the strongest claim, according to analyst Yan Derocles of Oddo Securities, together with KLM CEO Pieter Elbers and Lionel Guerin, a former pilot who leads regional unit Hop! and is seen as driver of the company’s short-haul restructuring.

‘Hand in the Engine’

The appointment of a transitional team lacking executive authority, or a technocrat CEO likely to compromise on cost cuts as low fuel prices temporarily bolster margins, would be bad news for investors, Derocles said.

“What worries me is that they will find someone who won’t have the capacity, when negotiations really get going, to say, here’s my plan, this is what we need to do,” he said. “They need a guy who can stick his hand in the engine.”

A lingering suspicion that De Juniac, aged 53 and awarded a four-year contract last year, quit because he was stopped from enforcing his strategy also means the company will struggle to lure a “charismatic leader,” Derocles said.

De Juniac said in Paris that he expects to leave in July after his appointment at IATA is confirmed by airline leaders at the group’s annual meeting at the start of June. He’ll be the organization’s seventh chief since 1945 -- and the first Frenchman -- taking over from ex-Cathay Pacific Airways Ltd. CEO Tony Tyler, who will have served for the shortest stint to date at five years.

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