Air France-KLM 'out of danger' but challenges await CEO

PARIS (Reuters) - The outgoing head of Air France-KLM AIRF.PA said on Wednesday he was no longer worried about the airline's survival, but his departure leaves an elusive successor facing a challenging task to complete its turnaround, airline industry sources said.

De Juniac, who announced his surprise departure to lead the International Air Transport Association on Tuesday, said he had achieved his goals of ending losses and reducing debt, despite having three years left of his mandate.

“Air France is out of the danger zone ... but it has not returned to the group of the top three or four best in the world, and that’s what’s needed,” he said in a radio interview.

His departure sent shares in Air France-KLM down 3.2 percent, bucking a firmer market.

“The share price reaction tells you he was well regarded by investors and that it will be a struggle to find somebody as good to replace him,” said Liberum analyst Gerald Khoo.

The Franco-Dutch group faces a six-week scramble to fill the post before its annual shareholder meeting on May 19.

“Having an AGM without knowing who is going to lead the group would not look very good,” Christian Magne, an employee shareholder representative on the Air France-KLM board, acknowledged.

Air France-KLM Chief Executive Officer Alexandre de Juniac attends the company's 2015 annual results presentation in Paris, France, February 18, 2016. REUTERS/Charles Platiau

“Everything will be done to find someone of the right profile for the AGM in May,” he told Reuters.

Air France-KLM is prepared to look outside the airline world, sources familiar with the process said.

External candidates include SNCF railways chief Guillaume Pepy, widely seen as seeking a new post. But Pepy said in a radio interview he was “only a candidate to do my work at SNCF”.

Aides to Nicolas Dufourcq, head of state bank BPIfrance, and Alexandre Bompard, head of French retailer FNAC, dismissed reports they could be candidates.

Although cited by some French media, Airbus AIR.PA planemaking chief Fabrice Bregier is seen as unlikely to seek the job, having reportedly refused it last time it came up.

Orange ORAN.PA telecoms head Stephane Richard, like de Juniac a former chief of staff at the treasury, could not be reached for comment about reports linking him to the job.

“The successor needs to be somebody who can work with the political world, plus handle the industrial relations. It needs to be someone with ultra-strong business skills and the ability to negotiate,” said aviation analyst John Strickland.

People close to him said de Juniac had been worn down by conflict with the company’s powerful unions.

“He wanted to leave ... and he can leave on a high,” an industry source said.

Others said de Juniac, who served at the treasury under former conservative President Nicolas Sarkozy, enjoyed only lukewarm support from the Socialist government over job cuts, an issue that could become a worse headache for his successor.

Additional reporting by James Regan, Victoria Bryan, Dominique Vidalon; Editing by Andrew Callus and David Evans