When I left on vacation last week, Air France’s pilots were striking. When I returned on Saturday, nothing had changed. Yesterday, however, the pilots came around and decided the time to end the strike had come. Why? Because they weren’t getting anywhere. If you were stranded during the two week strike, you were probably already angry. Knowing that it was all in vain has to make it burn even more. Nothing has been resolved and the airline is suffering mightily.
Why were the pilots striking in the first place? Well, it’s France, so…. But there actually was a real reason this time and it was over the airline’s turnaround plan called Perform 2020. (This was clearly named by some consultant somewhere.)
Perform 2020 was created to follow Transform 2015 (am I the only one feeling nauseous?), and it was meant to help stem the tremendous bleeding coming primarily from the group’s short haul operation. While there were multiple pieces involved in the plan, the key issue at hand here is the growth of the group’s low cost carrier, Transavia.
If this all sounds familiar, it should. Lufthansa has a very similar plan that resulted in a big pilot strike earlier this month. Both airlines are unimaginative, thinking that the key is to copy what the low cost carriers are doing and then hope they magically can beat them. Sure, that’ll work.
Transavia has been around for ages as a more traditional leisure/charter airline. (Heck, it even had its own low cost carrier, Basiq Air, at one point.) But KLM picked up a chunk of the airline in the early 1990s and then ended up with complete ownership in 2003. After Air France and KLM merged, the decision was made to make Transavia the company’s low cost carrier.
As of today, Transavia has 40+ airplanes with most in The Netherlands. There are a few in France, however, and the powerful pilots at Air France really don’t like that. So you can imagine how unhappy they were to find out that the new plan is for Transavia to grow to at least 100 airplanes by 2017.
The Dutch operation isn’t changing much, but the original plan called for growth in France and the creation of other bases around Europe. Transavia was expected to “rank amongst the leading low cost carriers in Europe.” Riiiiight.
This may surprise you, but the French pilots were all for the growth of Transavia. After all, there have been so many cuts lately, pilots always like to hear about opportunities for growth. Oh, but they had one demand. They wanted Transavia pilots to be on the same pay and work rules as mainline Air France pilots. You can guess how that went over.
The strike was inevitable, and the impact was huge. Flights were canceled, passengers were stranded, and it was just miserable for everyone. As the strike dragged on, Air France backed away from its plan for bases outside France and The Netherlands, but that wasn’t enough. The pilots would not budge on their insistence that Transavia France pilots be on the same terms as Air France pilots, especially since some Air France pilots would be transferring over as Air France shrunk.
Now the strike is over, but I’m sure it’s just a matter of time before the pilots get right back at it again. This isn’t an issue that’s going to be easily resolved. The pilots don’t want to recognize the reality of the European market. Meanwhile, Air France/KLM is delusional if it thinks it can build a low cost leader in the market.
What really should happen is that the pilots should agree to be paid less on short haul routes across the board. That would make Air France more competitive and it could be done under its own brand. But the chances of that happening are about as good as the chance that Air France pilots never strike again.
While the squabble goes on, both sides can just enjoy watching their airline burn.
[Original duel photo via Shutterstock]
What percentage of total operational costs is the gap between Air France rates and Transavia rates?
If it’s on the order of a percent or two, surely the benefit of having happy staff outweighs the relatively small cost.
Alan Green – I don’t know the pay rates here, but I’m sure a pilot can chime in. It’s definitely a lot less pay for more work. My understanding is that Air France has more traditional pay rates, similar to most legacy airlines. In the US, bankruptcy law allowed airlines to re-set them closer to market but that option doesn’t exist elsewhere. This is the same fight we’ve seen time and time again. It’s like a Jetstar/Qantas situation if we’re looking elsewhere in the world.
I’ve flown AirFrance once and it was very nice (empty 777 from LAX-CDG). Anyway, whenever I fly to Europe, I always think twice about AirFrance because literally every time I have been to Europe here has been an AF strike looming (or happening). That could also be a problem of theirs!
One thing about airline unions is they seem to not care they will run their airline out of business by what they want. That’s the biggest problem with any union, is the workers forget they work for the company that pays their wages and not for the union.
How many airlines have been run out of business by unions?
I can’t even think of one, although there might be one someplace.
Nick – Absolutely, Eastern. But in the US, unions don’t have enough power anymore to run airlines out of business. They won’t even have enough power to strike
Frank Lorenzo put Eastern out of business not the union. Lorenzo’s masters thesis was on how to bust a union and he did, over and over again.
So we’ve now had “Transform 2015” and “Perform 2020”. I’m sure we’ll soon see the rollout of “Transperform 2025”, marking the third Five Year Plan in the last three years. Seems fitting, since the European airline industry is about as close to an Orwellian dystopia as you can get!
Will someone please get these consultants some antiperspirant before they come up with something else.
I certainly have mixed emotions with this article. On one hand, I do recognize that the airline with the lowest costs will hold a significant competitive advantage over one that does not. To stay competitive against LCCs AirFrance, as well as BA and LH, need to keep their short haul rates at least somewhat similar to their competitors.
However, I don’t believe too many people would voluntarily take a 10-30% pay cut from their current employer. If pilots agree to a pay cut it would put downward pressure on the rest of the industry to do the same (look at what DL did to the former Pinnacle or what bankruptcy did to legacy US carriers to see how this plays out). The pilots only alternative course of action would be to switch jobs, lose years of accrued seniority and take a 50-75% pay cut.
I agree with Cranky that there needs to be a creative solution to this problem. Fighting the same fight over and over again benefits nobody, and wastes resources that could be better used elsewhere.
Maybe they could do what BA and IB have done. They purchased Vueling. Its a nice European LCC. I used them this summer for ORY – FCO and FCO – BCN.
Its better to buy than start from scratch.
It’s pretty rare that a person will volunteer for a permanent cut in their salary (or a pay freeze for the next 5+ years), just to ensure that shareholders see a better return on their investment. Even in France, there is something to be said for the social benefits of unions / labour movements.
David – Well the argument isn’t that this is just for the shareholders. The argument is that this will create more jobs because it will allow the airline to compete and grow. Whether the pilots believe it or want to accept it is a whole different issue.
Dear Brett: I admire you very much for your insight and expertise and also for your writing and business analysis of the airline industry. I entrust you to solve logistical problems! While your graphics here are economical and often amusing, I am reminded that you should abstain when it comes to choosing an airline livery. On a recent trip, I experienced the dynamic power of the new American livery. As they get more and more exposure, American planes are quite amazing in the air and parked at the gate. I am so certain now that It would have been a tragedy to plaster the old logo on the new tail. Some geeks just don’t have a refined appreciation for graphic design! It’s not just a matter of “personal preference.” It’s effective marketing. CJT
The AF pilots have been like Turkey’s voting for Christmas (or indeed Thanksgiving) Lufthansa pilots eventually accepted, or at least it permitted 90% of their short haul routes to be taken over by Germanwings whose costs, including pilot costs were much lower. The stranglehold of low cost carriers in Europe means they, and AF, have no choice but to reduce costs. However the AF pilots want to keep their crazy pay scales, at the top the most senior earn around $350,000 a year and that will never produce a low cost carrier. It appears we are no further forward, the issues were swept under the carpet to get the airline flying again but AF cannot afford to do so. Their loss of revenue was around 25 million Euros a day but for all their many faults, AF did rebook all long haul passengers with other carriers at considerable expense but if the strike begins again, it may have all been in vain.
“However the AF pilots want to keep their crazy pay scales, at the top the most senior earn around $350,000 a year and that will never produce a low cost carrier.”
Why are senior pilots at the top of the pay scale flying short-haul routes in Europe? That to me signals a bigger issue than the pay scale itself.
Southeasterner – I’m not sure that they are, but senior pilots do sometimes prefer the lifestyle of a short haul carrier. It’s just personal preference.
Strikes are a sign of failure. They rarely resolve anything and usually cost all sides a lot of money, inconvenience and time. I hope the sides can reach an accord. But, from what I read here, it looks unlikely. Sadly, the only “solution” may be liquidation.
P.S. I hope you had a great vacation.
Next on deck: Reform 2025
If AF was serious about running a low cost division, it would have started to prepare years ago by giving full scholarships to a fresh pool of people to study and train to be pilots under the new contract restrictions. It is unrealistic to expect pilots that have sacrificed years of their youth to fulfill the multitude of requirements to obtain and upkeep a license to suddenly accept reduced pay. The time spent away from loved ones, missing family milestones, to show commitment to the airline and career were sacrifices accepted with the promise of future benefits such as increasing pay scales and pension.
The same way surgeons and specialists refuse Medicaid patients because they feel the reimbursement rates are below their expectations for level of education and responsibilities, pilots weigh the amount of accommodations they made over the years to keep safety and reliability skills to build the airline brand.
If the strike is over, it is still affecting Air France flights out of Miami, FL. In the last 4 days, all flights from/to Paris have been canceled or severely delayed. The flights to Haiti have also been canceled. I know it may take some time to come back from irregular operations, but this is ridiculous.
TC – Correct. The strike was called off on Sunday, but it is taking Monday and Tuesday to get everything re-positioned to run a full schedule starting Wednesday. Details:
For business I booked flights through KLM to fly LAX to Amsterdam and exactly 7 days later was supposed to fly back Air France from Dusseldorf through CDG to LAX. Sorry I missed that Saturday at In-N-Out, I was waiting in the terminal to fly KLM 602 to AMS.
Well I saw the news that there was a strike, went to Air France web site and saw the offer they had of putting off my return when the strike was over or take a refund on the remaining portion of the ticket. Trust me I would have loved to had a little extra time off in Europe, but I’m also a husband, father and good employee. I needed to get business done and be home.
I called via my smart phone and the KLM app on it their 800#, was automatically forwarded to Delta and had the trip rebooked in minutes and arrived home just 5 hours after my original plans. The Delta flight was very pleasant and even the layover in Atlanta worked for the better in getting through customs, etc.
But it’s just a shame that strikes do affect the consumers making the choices. I was looking forward in trying a new airline, different aircraft (A318 & A380). The switch to Delta may have worked out for me on this trip, but what if I wasn’t so lucky and got stuck with 5-8 more days of hotel rooms? How about just the Air France website just crediting that portion of the trip which would have been way less than buying a one way replacement ticket?
Well Air France/KLM have a metal neutral joint venture with Delta.. so they didn’t pay Delta for the ticket, it just changed how the revenue was split versus the old way..
Nothing galls me more than adding up the financial loss for the days on strike, along with the pain and suffering of all the lost dream vacations, important business meetings, weddings, funerals etc etc that left passengers furious and bewildered and many more adjectives. And for what? Nothing. So the financial cost equals what? Can someone do the math for me? I want to know, whatever it was the pilots were fighting for, financially for their colleagues at Transavia, does it equal what was lost by AF during the strike? In other words, could this have been avoided by AF just agreeing to the terms of the pilots and not wasting everyone’s time? And would it all have come out even? At least for how many years? It reminds of the time when Northwest went on strike however many years ago. I recalled seeing on the front page of many newspapers, day after day, the snow covered planes of Northwest in Minneapolis with the financial losses adding up everyday, totals for those losses adding up everyday and I kept wondering the same thing. If Northwest just agreed to the terms on day 1, would that have equaled the losses, at least for a number of years? To say nothing of the loss of goodwill of their passengers?
I have worked for 3 airlines. 1 domestic and 2 international. In the sales division. I remember a very stupid commercial decision that was made at one of these carriers I worked for, that unfortunately lasted for a good number of years, that resulted in the loss of thousands of very very loyal frequent fliers over to our rival, only to be slowly won back after a newer, better product finally replaced the “ill conceived” product that drove our best customers away in the first place. Airlines are not the smartest bulbs on broadway, even though they have some brilliant minds working for them. Seems that egos get involved more often than not. As well as politics and other things I better not get into. And it costs them every single time. I wonder if they will ever learn. Even Southwest, who usually gets it right every single time, finally has a “lemon” on their hands with these thin new seats. How long will that take to reverse before they see the error of their ways? Anyway, if some math genius would gladly either correct my theory, or support it, I would love to know what AF’s losses could have bought if they never had let this strike happen.
SDBIKE – Remember, this is “Perform 2020” so it’s a long term plan here. I don’t know the exact dollar amount lost on this strike, but we’ll likely find out at the next earnings report. While it’ll have a big impact on this year’s earnings, I can’t imagine it’ll have much of a lasting dent beyond this. But of course, there will be another few strikes every year anyway. This is France after all.
Pay rates at Air France are still way above average, the most senior pilots flying long haul can earn $350,000 a year, they are all prepared to fly for Transavia but only at the same pay scale. In France, easyjet has taken the majority of short haul flying and as a ‘low cost’ airline, its pilots are on around $130,00 a year, so the gap is enormous. Air France is not profitable, neither were their neighbours Lufthansa on short haul routes but last year most European flights were handed by Lufthansa to Germanwings, a low cost subsiduary and it was clear Air France wanted to do the same. However they seemed to take the route of confrontation rather than communication and the result has been a 2 week strike losing them income of 20 million Euros a day. Although the strike is over, the dispute has moved nowhere and unless both sides are prepared to negotiate, it will only flare up again and Air France will at some point run out of money. The phrase ‘Turkeys voting for Christmas’ ( or indeed Thanksgiving) comes to mind!
Alan Bowen – Comparing Air France’s top long haul pilot pay and easyJet’s pay is like apples and oranges. You really need to look at Air France’s narrowbody pay rates to see who is flying the airplanes that compete against easyJet.
Regarding Germanwings, only routes that don’t touch Frankfurt or Munich are being given over by Lufthansa.
“Why were the pilots striking in the first place? Well, it’s France, so…. But there actually was a real reason this time and it was over the airline’s turnaround plan called Perform 2020. (This was clearly named by some consultant somewhere.)” – That first paragraph is exactly why I love Cranky and the unique voice he provides in covering the airline biz.
After being stranded in CDG during past AF strikes I have zero confidence in AF to provide a reliable schedule. AF executives AND pilots should be ashamed of their pathetic record of reliability, there is no way they can become profitable if customers are fearing constant strikes.
France is France. Yes so true and it is not just in the airline industry but throughout the country. I had the pleasure of riding in a SNCF (government run rail) locomotive from Nice to Marseille this summer. The engineer, a very pleasant man, was complaining how the government (management) was planning on reducing pay and increasing hours. Let’s see what he is unhappy about. He now works three days each week in the summer and less in the winter. On work days he drives a train from Nice to Marseille for about two and a half hours, lays over for an hour, and then drives another one back. He then goes home. He is paid over 200,000 euros a year. He also gets six weeks of vacation, many holidays, many “sick” days, paid or subsidized vacation trips, and many more perks. He comes to work in old jeans and tee-shirt, unshaved and very casual. He has the equivalent of a high school education. His union, as all in France, have the right to strike for just about anything, and they do, regularly. Most are fully paid for their strike days (by their employer). Although SNCF doesn’t have competition from low cost railroads, they now must compete with low cost airlines. Unfortunately, the rail infrastructure and rolling stock are seriously degrading and there seems to be no money to keep the railroads safe and financially viable without major changes. I believe the management wishes to freeze pay and increase work days by one each month. The union refuses and has threatened to strike. Being run by the government the rail management really has no incentive to change anything.
I understand that if one is brought up with subsidized champagne and caviar every day, it is difficult to transition to the lifestyle that the average worker outside of France lives just because the money has run out. Every day that France (management and workers, politicians and voters) put off the necessary reforms makes the inevitable change all that more difficult. Air France, SNCF, Renault, etc., it’s all the same story.