San Gottardo

Exactly what we expected: a French guy with a history in state-owned companies with a (let's be kind) "mixed" track record has been appointed new CEO of the AFKL group. He is currently the CEO of Transdev.

At 63 years, he probably doesn't care too much about the "2020" in "Perform 2020" but will just be a political puppet. In fact the French press talks a lot about how the various ministries gave their nod to this appointment.

He also happens to have graduated from ENA in the same class as Francois Hollande, Michel Sapin, Ségolène Royal, Dominique de Villepin, Jean-Pierre Jouet, ....

brunos

Sad indeed.
But he went to HEC and ENA with Francois Hollande...
His airline experience was acquired at AOM and it was not glorious.
But unions seem to like him.

Goldorak

At least, it's not Pépy

Let me hide my joy...
A pure political toy, indeed.

orbitmic

I don't want to pre-judge as of course, he might prove a perfectly good CEO, but if he is, it will, in all likelihood, be a mere and pure coincidence. How can we even have those (obvious) selection criteria for a major company in the 21st century. This is truly shameful and gives an extremely sad image of the airline and the country alike.

brunos

To be fair, this position has not attracted much interest from "top" people.

The job between two dictatorships (unions and government) is a headache.
The fixed salary of 600K, as set by the State, is probably a serious reduction for good candidates and prospects for a big bonus very uncertain, especially given the recent reactions of unions and politicians about the previous CEO salary.

But the profile of the candidates on the short list was depressingl.

Goldorak

Fully agreed. It was one of the main reason for many good candidates to decline the offer. That's why we had only left some people like Janaillac, Pepy, etc because they are already subjected to the same kind of capped salary.

Does Janailac at least speak English ?

orbitmic

While your point is definitely "true" I am not altogether confirmed that it is "fair". In a nutshell, with the right conditions I have absolutely no doubt that AFKL would have been able to poach almost any top candidate.

Leading one of the main world airlines should be an immensely attractive position for an ambitious and competent industry leader, and the fact that the company (or more accurately its main owner) has not been willing to do what it would take to make the job doable and attractive is, in and by itself, highly telling.

Incidentally, I am not altogether sure that a company facing as major a crisis as AFKL should rely on candidates. If they had been serious about turning AFKL around, the owners would have completely ignored the question of volunteers for the job, and instead put together a (ideally independent) search committee that would have tried to assess who was the best possible person for the job to then make the job tempting to them, and not the other way round.

But here goes, it is major French companies that we are talking about, so on that front, I can keep dreaming!

johan rebel

According to luchtvaartnieuw.nl (in Dutch, of course) the KL cockpit and cabin crew unions are crying blue murder over the appointment and urging Dutch board members to put up a fight.

Fat chance.

Johab

San Gottardo

To be fair (I know, that term again ) your observation is true for companies that are (part-)state-owned. But for other major French companies, we have seen a mix of patterns: L'Oréal had a British CEO for a very long time, Sanofi had a Austrian CEO for some time, and AXA just appointed a German CEO.

The thing that makes me a little mad is how for everyone it seems to go by itself that a shareholder who only has 16% and whose interests are not aligned with the those of the company de-facto decides and promotes someone to the CEO job according to criteria which do not make sense in the situation the company is in. Air France is a French-Dutch company (which is not the same as Transdev which is a French company with a Dutch subsidiary), operating in a global market (which is not the same as operating in a multitude of local markets around the globe), where customers must be won every day (which is not the same as winning a contract for a public transport network every couple of years like Transdev or RATP Dev). Moreover, Air France is in a multi-year restructuring and re-positioning exercise (at least it should be) - and they hire a guy who is aged 63?? He apparently has been successful in managing the difficult labour-relations context at SNCM, and many of us know that this must have been a "tough one". But doesn't that qualify him rather for the job of CEO of Air France instead of CEO of the AFKL holding?

Also, the chap has not more than maybe 7-8 years of private sector experience. Which of course does not matter a lot to people that are convinced that being chief of staff to the Prefet of Finistère or heading the French Tourism Office in NY give you all the right experience that you need to play against Willie Walsh or Tim Clark (what was Clark doing five years ago? Building Emirates into a global airline giant. What was Janaillac doing five years ago? Working for the Paris underground company).

Maybe he is just a placeholder for 2-3 years and then another, who will turn the company around as he himself has nothing to lose, and then a fresh face will come after the bloodbath and take the company to a brighter future. But maybe he is just another puppet who'll manage through the corridors of Matignon and Elysée and ask his political friends to whom he has to be grateful to have gotten the job how far he may go in responding to the whims of pilots, rampies and check-in agents.

orbitmic

Well, yes and no. Sure it is lamost "always" the case where there is part state ownership, but where there is none, it is no guarantee that things will be done transparently, and in a way, it is even more shocking. Total? Vinci? BNP Paribas? etc. In fact, it is unclear to me whether the commonality between the examples that you take relates to the fact that they have no state ownership or rather to the fact that they are big but in sectors not considered "strategic" by the French state.

I really do think about the French elite processes that actually goes beyond the intervention of the State as a shareholder.

Actually, the state has 17.6% of the shares, and in fairness, because of the double voting rights, that means 35% of the voting rights. To play devil's advocate for a minute, it is admittedly not unusual for such a dominant voter to play a dominant role in nominations (especially considering that most of the rest is highly fractioned).

brunos

That's not really fair
There are quite a few shareholders who have been registered for over two years and therefore hold double voting rights. This include long-time financial investors. It is hard to know how many 17.6% double votes translate into as a percentage of total voting rights. Assuming conservatively that 50% of the shares have double voting right (it's probably more currently), that means that the State owns 35.2/150=23.5% of the voting rights..
It is the major shareholder, but not a dominant one.
The problem though is that most of the other major shareholders are either the employee's stock ownership plan or asset managers (on behalf of their clients) who might not get heavily involved in management.

One of the major task of JMJ will be to confront SNPL who believes that they are now running the airline. AdJ tried and lost.

San Gottardo

Lovely job to have. Squeezed between staff who refuse to be more productive, easyjet who is more productive already and competing in some major customer segments and routes, Willie Walsh who knows more about the business and whose airlines are not only more productive but also competing for all the same customer segments AF competes in as well, Tim Clark who knows more about the business and who has already won over large chunks of one of AFKL's main customer segments, and a government that has bizarre dreams about national champions and social peace at all price (one can go to Place de République and see how well that works). Tough job. Especially if previously one was running underground trains, local busses and the in-tray of the top bureaucrat in the Far West of Britanny.

Being an executive searcher in France must be quite a frustrating job when you see how regularly companies don't get the leaders that they need but the chaps who are buddies with someone who is the buddy of someone who has some perceived power.

JOUY31

Godspeed, AdJ and welcome to JMJ

orbitmic

Well, actually, if we are going to into the detail, it is worth remembering that the double vote can only be given to nominative shareholders and not with people owning things such as "titres au porteur", which are typically dominant, especially in cases like AF where the privatisation process was largely advertised through banks to small share holders at the time.

I have of course no insight into the share holding make up of AFKL (they just mention that 74.4% are floating shares, 17.6% to the French state, 6.6% for employees, and 1.4% for self-control, which tells us nothing), but compared to many other French companies, it does not have many declared large institutional shareholders.

So while it is absolutely fair to mention that the double voting rights do not only apply to the State, I would personally think that your estimate above might be over-pessimistic regarding the actual voting power of the state. That is an unknowledgeable guess on my part though so if you think that I underestimate nominative shareholding in AF I'm happy to take your word for it.

brunos

You are quite right that it is hard to estimate.
As of recently, the major shareholders were:
Government of France 17.6%
Employee Stock Ownership Plan 6 .51%
Donald Smith & Co., Inc. 5.80%
Rothschild & Cie Gestion SCA 4.99%
Capital Research & Management 3.08%
Majedie Asset Management Ltd. 2.34%
DNCA Finance SA 2.29%
Dimensional Fund Advisors LP 1.40%
Air France-KLM SA 1.39%
Lazard Frères Gestion SAS 1.36%

Many have been longterm investors (unfortunately for them). Anyone owning more than 5% of the shares must hold them in registered form. I know as a fact that one of those below 5% hase moved to registered shares, but some have probably not. Most small investors have not. So I have no educated guess.

PS: Just a simple point of silly maths. Even if no other shareholder besides the French State had double vote rights, your initial calculation is still incorrect. The total percentage of voting rights of the State would move from 17.6/100 to 35.2/117.6. Sorry orbitmic, I am ashamed but I could not resist.