Air France pilots agree to new budget airline plan

The French flag carrier has negotiated a deal with its flyers that will see the launch of a long-haul budget unit designed to take on Arabian Gulf competitors.

Air France planes parked at the Charles de Gaulle International Airport in Roissy, near Paris. The carrier's pilots have approved the company's plan to launch a new budget airline. Christophe Petit TShow more

Air France pilots approved the carrier’s plan to carve out a new budget airline business to counter increasing pressure from rivals.

It will number 10 long-haul aircraft by 2020 with some 30 per cent of operations focused on newly-created routes, according to Business Traveller magazine.

Flight-deck employees represented by the SNPL union, who account for two-thirds of pilots at the French arm of Air France-KLM Group, voted 58.1 per cent in favour of the proposal to create the unit, provisionally dubbed Boost, the labour group said. Further talks are needed to refine the plan, it said.

The approval bolsters the Air France-KLM chief executive Jean-Marc Janaillac’s strategy to generate consistent earnings in the face of industrywide competition in Europe from both discount regional airlines and high-end Arabian Gulf carriers.

The Air France brand is unprofitable on 35 per cent of its routes, with 10 per cent involving “heavy” losses, Mr Janaillac said in November while unveiling the Boost project. His announced goal was 20 per cent lower costs at Boost than at Air France’s mainline operations. Still, it is unclear exactly how Boost, which is focused on boosting margins, will woo customers. The chief executive said at the time that any spending reductions would not be passed on to consumers, so the unit would not be a “low-fare” carrier competing on price.

“Certainly the yes vote is better than the alternative, though given how much management had already compromised on the initial plan, it’s not a huge surprise,” said Gerald Khoo, an analyst at Liberum Capital with a sell recommendation on the airline’s shares. The Boost project does not go far enough to “immediately transform the fortunes of Air France”, he said.

Boost is looking at hiring new flight attendants who had been paid 40 per cent less than cabin crews at Air France’s main network. That could still set the stage for a conflict after flight attendants’ representatives called the proposal “scandalous.”

The cockpit crews’ approval follows Air France’s climbdown on an earlier proposal to cut pilot compensation by 15 per cent at the Boost unit. This month, management said it would instead ask pilots across all of Air France to shoulder the burden by taking a 1.5 per cent wage reduction. Employees have yet to vote on that plan.

The SNPL’s leadership is set to ratify the pilots’ vote on Wednesday. Participation in the ballot was almost 74 per cent, the union said.

* Bloomberg