Thea Franco-Dutch airline holding company Air France-KLM named Air Canada’s Ben Smith as its new CEO amid a strong union backlash.
A 46-year old Smith is the first non-French CEO of the company since it was founded in 1933. In a statement issued on August 16, Air France’s unions rejected the appointment, saying Smith’s newly announced role would not be familiar with the French “social model.”
Smith served as Air Canada’s second-in-command and is credited with developing Air Canada’s low-cost subsidiary Rouge. At the same time, he is credited with sealing a 10-year pay deal with Air Canada’s unions in 2015.
Representing the French government – who is a shareholder in the company – Economy Minister Bruno Le Maire and Transport Minister Elisabeth Borne hailed the appointment. Air France-KLM’s main shareholders are the French state (14,4%), Delta Airlines (14%), and China Eastern Airlines (8.8%).
French President Emmanuel Macron weighed in on the appointment, making it clear that the government favoured a CEO with knowledge of the aviation industry.
In May, France’s Prime Minister Bruno Le Maire warned that the future of the company was in questions and called on workers to act “responsibly”. He made clear that the government would not step in to cover the company’s deficit.
Smith takes over at a time when Air France is facing a strike by pilots, who have not seen their pay increase since 2012. The company estimates the losses incurred from the numerous periodic strikes that have taken place since February at €335 million. Operating profits have dropped from €593 million in the second quarter of 2017 to €109 million in the second quarter of this year.
Smith’s proposed salary is several times higher than that of Janaillac. The expectation is that he will bring productivity in line with major full service European competitors, Lufthansa and British Airways. “I am well aware of the competitive challenges the Air France-KLM Group is currently facing,” Smith said in a recent statement, making no reference to the threat of new strikes that are planned for August 27.
Air France’s shares have nosedived by 35% since January.