Air France strike amid Europe's low-cost shakeup

AP News
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Posted: Sep 15, 2014 3:31 PM
Air France strike amid Europe's low-cost shakeup

PARIS (AP) — Air France canceled at least half its flights around the world on Monday as pilots began a weeklong strike, highlighting the trouble Europe's flagship airlines face in keeping up with low-cost competitors.

Air France-KLM, which is the national carrier for France and the Netherlands, said it can ensure just 48 percent of flights Monday, 40 percent on Tuesday and perhaps less later in the week as unions protest against its savings program.

Like Lufthansa, Alitalia, SAS and other national airlines in Europe, Air France-KLM is focusing on cost cuts to remain competitive. That, however, can be difficult in some European countries where laws protecting workers' rights are strong.

Last week, Air France announced a plan to save 1 billion euros ($1.3 billion) over the next several years, in part by transferring much of its European operations to low-cost subsidiary Transavia.

Air France pilots' unions are calling foul, and called a weeklong strike starting Monday. They accuse the airline of trying to shift their jobs to countries with lower taxes and cheaper labor — for example by basing planes for France-Portugal flights in Portugal, instead of France.

"This is about a project of out-sourcing," said Jean-Louis Barber, the president of the main Air France pilots' union, SNPL. "That's why pilots are angry."

Investors seem to think it's the right thing to do. Shares in Air France rose on news of the savings plan, after three years of difficult restructuring and cost cuts.

Air France-KLM's plans for Transavia envision a fleet of 100 jets by 2017 carrying more than 20 million passengers a year, more than double the current load.

On Monday, the Paris airport authority said only half of Air France flights were operating out of Charles de Gaulle and Orly airports. At Charles de Gaulle, crowds gathered at the Air France counter to try to change their tickets, and canceled flights were removed from departure and arrival screens.

"I thought that something was up when I saw that my flight wasn't on the departures board," said Austrian tourist Alice White. "I hope I will be back to Vienna in time to be at work."

Catherine Jude, operations director at Air France, apologized to customers, saying, "This strike is damaging to all our passengers."

Budget carrier EasyJet is watching closely — and announced an offer of extra seats to passengers stranded by the Air France strike.

In Germany, a union representing Lufthansa's pilots threatened to walk off the job at Frankfurt airport Tuesday, but called off the strike late Monday after receiving an offer from the airline. The two sides had been locked in a dispute over the pilots' demand that Lufthansa keep paying a transition payment for those wanting to retire early. The airline wants to cut those payments.

Pilots for Romania's national airline staged a walkout Monday over pay, prompting cancellations and delays on international and domestic flights.

Other established European carriers have faced similar problems in the past, with many still struggling to adapt.

Scandinavia's SAS, under pressure from low-cost airlines including Norwegian and Ryanair, was close to bankruptcy in 2012 when unions agreed to a $440 million a year savings package that included salary cuts and changes to work schedules and pension plans for employees. SAS, which still has higher operating costs than its competitors in the region, has since intensified its savings efforts.

Italy's Alitalia is being taken over by Emirates-based airline Etihad, after likewise teetering on the brink of bankruptcy. Unions had to agree to deep labor force cuts, and the head of Etihad will be meeting with employees in coming days to discuss the airline's organization. Etihad is injecting 560 million euros ($750 million) for a 49-percent stake, and it aims to return Alitalia to profitability by 2017.

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Kirsten Grieshaber and Geir Moulson in Berlin, Alison Mutler in Bucharest, Colleen Barry in Milan and Karl Ritter in Stockholm contributed to this report.