Air France's Union Fight Handed to Former Hollande Classmate

  • New CEO Janaillac to lead Air France's `race with giants'
  • Transport manager hasn't worked for an airline since the 1990s

Air France-KLM Group appointed a former schoolmate of French President Francois Hollande as its chief executive officer, tightening ties with the political establishment and making it unlikely that the partly state-owned airline will squeeze unions for concessions as elections loom.

Jean-Marc Janaillac, 63, who graduated in the same class as Hollande from France’s prestigious Ecole Nationale d’Administration, will take one of the toughest jobs in the aviation industry at the end of July. His only airline experience dates from running a now-defunct French regional carrier in the 1990s and a stint as a board member at Air France that ended in 1994.

While his connections to Hollande and other top officials in France could help gain access to the corridors of power, political entanglements may also prove to be a hindrance to hard-biting reforms. Europe’s largest airline, which has seen its lead over Deutsche Lufthansa AG and British Airways parent IAG SA narrow in recent years, is getting squeezed by low-cost carriers clawing away regional passengers and the likes of Emirates and Qatar Airways scooping up lucrative long-haul clients.

“His biggest challenge will be accelerating the pace of restructuring, yet it’ll be very difficult ahead of an election year,” said Yan Derocles, an analyst at Oddo Securities in Paris. “He won’t want to make waves.”

Ripped Shirts

Janaillac is filling a hole left after Alexandre de Juniac, 53, unexpectedly quit three weeks ago to run the International Air Transport Association, the airline industry’s main lobby group. De Juniac, a former French civil servant, had tried to overcome union resistance to create a low-cost arm to better compete with Ryanair Holdings Plc and EasyJet Plc.

The dispute caused French pilots to stage a two-week walkout in 2014 that cost the company 500 million euros ($573 million). The government, which owns 15.9 percent of Air France and often caves in to political pressure from unions, pushed management to back down and end the strike. Broader tension with workers over concessions then escalated into a confrontation last year when Air France executives had their shirts ripped by protesters. De Juniac, a former chief of staff at the French Finance Ministry, has said the airline needs vast changes to compete in a “race with giants.”

The changes may be even harder to carry out in the foreseeable future. Hollande and Prime Minister Manuel Valls are clamping down to prevent protests ahead of the 2017 election. Air France also had the dumb luck to have reported operating profit in 2015, the first time in four years. While the turnaround was largely due to a drop in fuel prices rather than structural improvements, unions gained more leverage to fight cuts.

“We hope that Mr Janaillac can quickly restore confidence with employees,” Philippe Evain, the president of Air France’s biggest pilot union, said in a statement. “The pilots view the change as an opportunity to confront the company’s problems by seeking real solutions and not just assign blame.”

In addition to unresolved pilot talks, contracts with Air France cabin crew will expire in October and will also need to be renegotiated. There is no specific deadline for pilots. Those talks are rolling, making it more difficult for a new CEO to pin down concessions.

Low Visibility

To his credit, Janaillac has a broad background in the French transport sector. He’s served as chairman and CEO of Transdev since 2012 and spearheaded a push there to gain labor concessions for the company, which operates rail and bus lines in 19 countries. He also managed to sell Transdev’s stake in SNCM, a troubled ferry company. Previously, he ran the development unit of RATP, a state-owned company that runs most of the buses, subways and trams in Paris.

“He has some positives,” including solid management experience and strong political connections, said Ruxandra Haradau-Doeser, an analyst with Kepler Cheuvreux. But given that the handover won’t take place until the end of July, “visibility remains low” and the prospect of a deal with pilots this year is “very low.”

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