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What will the effect of the AirFrance problems be on Delta?

What will the effect of the AirFrance problems be on Delta?

Old May 7, 18, 10:04 pm
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What will the effect of the AirFrance problems be on Delta?

It looks like a major meltdown at AirFrance with the CEO resigning and even bankruptcy being discussed with no government bailout likely. What will this do to Delta's competitiveness in the global market? Or is it not likely to have much of an impact?
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Old May 7, 18, 10:22 pm
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I would think any collapse is going to be a big blow for DL. They do have KLM but how much feed realistically can KLM pick-up and how much feed can DL realistically divert over to AMS?

It'll hurt any secondary city - CDG flights too (which impacts me personally with RDU - CDG). If you can no longer reliably provide feed on the XYZ - CDG end, it's going to hurt loads. Real scenario here for me. I've got to go back to Europe in June with the trip ending in Amsterdam. I would prefer to go AMS - CDG - RDU so that I can take the TATL straight to RDU instead of having to get on another flight, but I'll only be taking that if I can get KL metal to CDG. Otherwise, it's not worth the hassle of tracking whether an AF feeder flight gets canceled.

I would imagine DL is also not particularly pleased to see their €375 million investment they made in AF/KLM get decimated on the AF side.
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Old May 7, 18, 11:27 pm
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My guess is that it's a lot of politics and empty threats. How many times did DL go thru bankruptcy? And look where they are now. Despite what they may say now, the French govt will certainly not allow AF to fail.
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Old May 7, 18, 11:38 pm
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Originally Posted by kjnangre View Post
My guess is that it's a lot of politics and empty threats. How many times did DL go thru bankruptcy? And look where they are now. Despite what they may say now, the French govt will certainly not allow AF to fail.
The Macron government is different then others. Look at what has already happened with the train company. He was Finance Minister and is still popular despite the dislike by some of the reforms at the train company.

Regardless, I don't see much impact on DL, beyond loses due to shareholdings.
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Old May 8, 18, 12:48 am
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Originally Posted by kjnangre View Post
My guess is that it's a lot of politics and empty threats. How many times did DL go thru bankruptcy? And look where they are now. Despite what they may say now, the French govt will certainly not allow AF to fail.
Agreed. This is noise at this point.
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Old May 8, 18, 5:32 am
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There is no risk for bankruptcy for AF either short or medium term. But AF has clearly some very serious issues to deal with and bankruptcy might be at the end of the tunnel if nothing is done and if the minority’s of crazy and irresponsible unionized employees do not change their behaviors.
But I am in the opinion that DL will never let a major business partner like AF collapse. They will eventually find a way to take the control (with the agreement of other shareholders of course). They are already a minor shareholder.
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Old May 8, 18, 5:36 am
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Originally Posted by kjnangre View Post
My guess is that it's a lot of politics and empty threats. How many times did DL go thru bankruptcy? And look where they are now. Despite what they may say now, the French govt will certainly not allow AF to fail.
Delta has filed chapter eleven once.
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Old May 8, 18, 5:59 am
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The French Government won't bail AF out simply because it does not own AF.

It recognises the company needs to reform as part of Macron's economic & employment changes. See SNCF (which the French Government does own).

It does own 14% of the AF-KLM holding company but that is not the same as owning AF.

There really isn't a European equivalent to US Chapter 11 so comparisons to DL aren't relevant to AF.
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Old May 8, 18, 6:11 am
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Originally Posted by UKtravelbear View Post
The French Government won't bail AF out simply because it does not own AF.
Respectfully, I think this is complete nonsense. What does ownership have to do with anything? The US govt bailed out the auto industry and I promise you that, at that time, the US govt had no ownership in GM or Ford. The US govt also bailed out the banks, and the exact same argument applies there too.

Every AF plane flies the colors of the French flag on its tail. It is beyond ridiculous to think that the govt of France will allow AF to fail, and have British Airways or Swiss or Virgin become the main operator at CDG. It will never happen.
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Old May 8, 18, 6:39 am
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There are however EU rules about state aid. That said I think AF/KLM is a long way from failing.
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Old May 8, 18, 6:42 am
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Originally Posted by flyerslc View Post
It looks like a major meltdown at AirFrance with the CEO resigning and even bankruptcy being discussed with no government bailout likely.
The premise is false. AF isn't going to be liquidated any more than is the Eiffel Tower.

Here's an extract from Bloomberg published yesterday, emphasis mine:

In recent months, however, Janaillac has failed to get anywhere with employees, who have been demanding better pay. They want a 5.1 percent raise now; the management put a 7 percent increase over four years to the vote among company staff. Last Friday, Janaillac resigned after the vote went against that proposal. That’s when Le Maire warned workers demanding “unjustified pay increases” to “take responsibility” because the airline’s “survival” was at stake.

That’s not strictly true, and the management knows it. So should Le Maire, who speaks for a large shareholder (the French government owns 14.3 percent of Air France-KLM). In 2016, according to the company, staff productivity increased by 2.3 percent at Air France and 4.2 percent at the Dutch unit, KLM, while staff costs stayed constant. In 2017, Air France saw a 3.7 percent productivity increase and KLM a 2.9 percent one; staff costs increased by 2 percent.

A pay rise to catch up with the productivity growth – which, for pilots and crews, means spending more time in the air – isn’t therefore “unjustified.”


https://www.bloomberg.com/view/artic...to-end-strikes

There will be a compromise leading to a pay raise larger than what Janaillac offered.
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Old May 8, 18, 6:58 am
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Originally Posted by kjnangre View Post
Respectfully, I think this is complete nonsense. What does ownership have to do with anything? The US govt bailed out the auto industry and I promise you that, at that time, the US govt had no ownership in GM or Ford. The US govt also bailed out the banks, and the exact same argument applies there too.

Every AF plane flies the colors of the French flag on its tail. It is beyond ridiculous to think that the govt of France will allow AF to fail, and have British Airways or Swiss or Virgin become the main operator at CDG. It will never happen.
Having a little flag stuck on a plane makes absolutely no difference. In this respect it is merely a logo and nothing more. BA has a union flag on it's tail but the UK government wouldn't bail it out because of that.

The auto bailout was a loan that was repaid it wasn't a free gift (like some like to make out it was)
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Old May 8, 18, 7:08 am
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The French government owns a decent sized chunk of AF, though.
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Old May 8, 18, 8:30 am
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Originally Posted by Worcester View Post
There are however EU rules about state aid.
EU rules don't apply to France or Germany. If push came to shove, AF will be bailed out, rules or no rules. That being said, I don't see the need for a bail out any time soon. The most likely government intervention would be some sort of intervention with the union negotiations.
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Old May 8, 18, 9:10 am
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Delta only owns some 8.8% of AF, as does China Eastern. They are the largest shareholders after the French state. AF-KLM is not going down the tubes anytime soon. However, they do have some serious labor problems, which the previous CEO sidestepped by improving productivity, rather than big cuts and firings. Now the AF unions are pushing for increases, which is reasonable, everyone wants a fair raise, but the company doesn't have the profit margin to compete with smaller, nimbler airlines.
The Situation likes this.
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