Air France CEO Says Instability Risks Swamping Oil Windfall

  • `The volatility is enormous,' CEO Alexandre De Juniac says
  • Workers `ready' to resolve dispute and boost productivity

Air France-KLM Group warned that economic and political instability risks undoing the benefits of cheap fuel prices.

“Oil at the moment is good, but the volatility is enormous,” Chief Executive Officer Alexandre De Juniac said in an interview at an aviation conference in Amsterdam. “If things remain reasonable, we will have a good year. But it is a year of economic uncertainties” coupled with geopolitical risk.

Europe’s largest carrier has first-hand experience. The November terrorist attacks in Paris caused travel to the key hub to slump, costing the airline 50 million euros ($54 million) that month, and another 70 million euros in December. Meanwhile, a long-standing dispute with workers took a violent turn in October. Reaching a labor agreement is critical for the company, which trails European competitors in profitability and market capitalization, making it more vulnerable.

Air France-KLM Labor Costs

De Juniac is negotiating with unions representing cabin and ground crews at the Air France brand and Dutch division KLM, as well as pilots at te French unit, after pulling a plan to expand its Transavia low-cost arm across Europe. The company had threatened to fire people and scale back the route network and fleet if an accord with Air France pilots on savings isn’t reached by early this year. The carrier last week offered unions a program for as much as 3 percent annual seat-capacity growth through 2020 in exchange for concessions, adding that trimming the fleet and workforce remained “Plan B.”

“I feel that our people are fully aware of the situation of the company, which has to be improved,” De Juniac said. “They are fully ready to make improvements and to contribute to productivity gains. They know they are doing that for growth.”

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