Air France under pressure as old guard return
PARIS (Reuters) - Air France-KLM (AIRF.PA) came under pressure on Tuesday from investors and unions for delaying restructuring moves and bringing back a former leader to try and haul Europe's largest airline by revenues back to profit.
When news of the management shake-up broke late on Monday investors had initially pushed the airline's shares up as much as 6 percent, but those gains unravelled as analysts feared the airline's old guard would struggle to put things right.
At 11:23 p.m. Air France-KLM shares were down 3.8 percent at 5.39 euros (4.69 pounds). French blue chips as a whole were down almost 2 percent after ratings Moody's issued a warning on France's rating outlook.
Jean-Cyril Spinetta will remain as chairman and resume his previous role as chief executive, replacing Pierre-Henri Gourgeon who resigned after 34 stormy months overshadowed by Europe's debt crisis and the 2009 Rio-Paris plane crash.
Leo Van Wijk, who together with Air France's Spinetta masterminded the 2004 merger of French and Dutch carriers from the KLM side, will also return as deputy chief executive.
The move brings back into daily operations two industry veterans who are widely respected by investors, and who are expected to prepare the ground for a newly anointed successor, former arms industry executive Alexandre de Juniac.
Juniac was appointed to run the Air France division, the most troubled and strike-prone part of the group, with a mandate to introduce measures to improve its financial performance after the group slipped back to a quarterly loss.
But analysts said neither Spinetta, despite more than a decade of experience at the company, nor Juniac, freshly appointed from the finance ministry, would find it easy to tackle Air France's unions and a tricky political calendar.
"We are not convinced that bringing back Spinetta will improve things, certainly not in the short-term," Deutsche Bank told investors in a research note.
"Spinetta is undoubtedly one the best strategic thinkers in the airline industry but what Air France-KLM needs is good old fashioned cost cutting from a 'Wille Walsh' type," it said referring to the Irishman who overhauled British Airways.
Analysts said radical cost cuts would be especially awkward ahead of French presidential elections in April-May next year.
Both Spinetta and Juniac are seen as astute state appointees, Spinetta once a Socialist ministerial adviser and Juniac coming with the backing of France's conservatives. Both have a deft political touch alongside industrial experience.
One of France's biggest unions, the CFDT, said overnight it would ask many of the company's 100,000 staff to consider unspecified action if the management did not provide clarity.
Some cabin crew already planned strikes for next weekend.
The management shake-up comes amid a parallel warning from global airlines that business travel is shrinking, a sign of reduced economic confidence and a blow to traditional carriers.
There was a sharp fall during August in the number of passengers using first- and business-class seats, bringing premium travel back to the levels of the fourth quarter of last year, according to the International Air Transport Association.
Air France-KLM, whose shares have fallen more than 50 percent this year and lagged other European majors as key competitors stayed in profit, may feel the pain more than most.
Morgan Stanley told investors Air France-KLM was the "most challenged" airline relative to its peers, market sources said.
Gourgeon had already drawn up tentative plans for 800 million euros of fresh cost cuts last month but several analysts said the airline may need to dig deeper than this.
Juniac was top aide to former French finance minister Christine Lagarde until her recent appointment as head of the International Monetary Fund and previously held senior posts at Thales (TCFP.PA), the state-controlled French defence group.
The 48-year-old industrialist will submit directly to the board measures to lift the performance of the Air France unit and follow them up "over time," the group said in a statement.
In a clear signal that Juniac is expected to succeed Spinetta, the group said a plan to simplify its parent structure would be delayed from early 2012 to 2013 while Spinetta served as interim CEO.
Juniac's appointment must be approved by an ethics committee examining any overlap with his duties in government. A previous move to appoint him head of French nuclear power plant maker Areva was blocked by such a panel, but Juniac avoided handling aerospace issues to avoid any potential conflicts of interest as he sought to return to the sector.
(Additional reporting by Blaise Robinson, Juliette Rouillon; Editing by David Holmes and Elaine Hardcastle)
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