Air France stock sinks amid strikes and warning on future of flagship airline

Air France's share price has dived after its chief executive quit and the French government warned that the country's flagship carrier might collapse.

It came as a new strike on Monday over wage demands prompted the cancellation of about 15% of Air France flights worldwide.

The number of striking workers appears to be slightly declining as the airline enters its 14th day of walkouts this year, but the labour action has already cost the company more than 300 million euros (£260 million) in a matter of weeks.

Air France's share price plunged nearly 13% at the open on Monday and was trading 10.9% lower at 7.21 euros in the early afternoon in Paris amid questions about its future management and direction.

The share price woes follow the resignation on Friday evening of Air France-KLM chief executive Jean-Marc Janaillac after workers rejected the company's latest wage proposal.

Jean-Marc Janaillac
Jean-Marc Janaillac

The Air France drama poses yet another problem for President Emmanuel Macron's government as he marks a year in office. The industrial dispute come as separate strikes over Mr Macron's labour reforms are hitting France's national railways.

Finance minister Bruno Le Maire on Sunday said the government, which owns 14% of Air France, would not rescue the airline.

He urged striking pilots, crew and ground staff to be "responsible" and said the survival of Air France "is at stake".

"Air France will disappear if it does not make the necessary efforts to be competitive," he said on BFM television.

The strikes have taken a heavier toll on Air France than management and investors expected, and the company last week forecast a "notably" lower income this year compared with 2017.

Unions want a 5.1% pay rise this year, arguing that the company is making enough of a profit to meet their demands.

They noted that their wages have been frozen since 2011 as the airline cut jobs and restructured.

The company argues that the union demands would wipe out hard-earned gains from the restructuring, which was aimed at stemming years of losses and keeping Air France afloat, as well as jeopardise efforts to win back market share from low-cost airlines and big-spending Middle East and Asian carriers.

After protracted negotiations, management last week offered a 2% pay rise this year and an additional 5% over 2019-2021.

Employees rejected that offer on Friday, prompting the CEO's decision to step down. He called the dispute a "huge waste that can only make our competitors rejoice".

The Air France-KLM board asked Mr Janaillac to stay on until May 15 when it will put a transitional leadership in place.