AOM and Air Liberté fly France into political thundercloud
AOM and Air Liberté, the two French airlines affiliated to Swissair, filed for insolvency on Friday, raising the prospect of a major political dispute and further social unrest thatcould spell chaos for tourists heading to southern France this summer.
By seeking court protection, depôt de bilans, whilst continuing to operate, the airlines said they hoped to give themselves time to find ways of overcoming their financial crisis.
Hours earlier, EasyJet, the UK-based low-cost airline, made an opportunistic bid to take over some of the assets of AOM and Air Liberté. The UK carrier has offered to secure some jobs at Paris Orly airport in return for take off and landing rights. Orly, where Air Liberté and AOM have 30 per cent of the slots, is one of Europe's most restricted airports and is currently closed to new entrants.
But French labour unions were prompt to reject EasyJet's offer. "It adds bad news rather than good news," said Nathalie Cohen, a representative of the CGT labour union. "This has nothing to do with a full takeover and staff will not welcome the prospect of dealing with a company that offers worse work and salary conditions than what they have now."
The French airlines' woes come at a sensitive time for France's Socialist-led government, which endorsed this week controversial amendments to the work legislation to respond to labour union demands for tighter control on management following recent lay-off announcements by companies such as Moulinex, Danone and Marks and Spencer, the British retailer.
Jean-Claude Gayssot, the French transport minister, said he "disapproved" of management's decision to file for insolvency when "it is clear that solutions exist."
The Communist minister also strengthened his criticism against Marine-Wendel, the French group that is technically the controlling shareholder of the French carriers, as well as Swissair, for failing to provide greater support for the airlines. "We must save this second French airline group," Mr Gayssot said. "Just because things were badly done, badly managed and badly decided two years ago, that doesn't mean there isn't room for it."
Swissair's share price, which has fallen sharply this week on concern over the losses in France and the problems at Sabena in Belgium, recovered on Friday to stand nearly 4 per cent higher at SFr107.5 in late trading.
Swissair only bought its stake in the French airlines early last year from British Airways as part of an misguided expansion strategy under Swissair's discredited former management.
Mario Corti, Swissiar's new chief executive, blamed Marine-Wendel for the airlines' bankruptcy for failing to back a refinancing: "Ultimately, the Swissair Group has to safeguard the interests of it own shareholders."
In recent weeks, employees of the loss-making French airlines have staged sporadic strikes to protest about the demise of their companies.
The bankruptcy filing is likely to lead to further social unrest, which could bring chaos ahead of the summer holidays. The two airlines have a large presence on routes to the south of France, such as Nice, the only airport on the Côte d'Azur, one of France's main tourist regions.
EasyJet said it had written to Swissair and the French government about its possible offer, which it said could preserve "hundreds of jobs". It had also approached Marine-Wendel, which is headed by Ernest-Antoine Seilliere, an aristocratic entrepreneur who also chairs Medef, the powerful French federation of employers.
Ray Webster, EasyJet chief executive, said he had "identified a number of domestic and intra-European routes from Paris" that would fit his airlines strategy. He said that in time Orly could grow to the same size as EasyJet's main base at Luton, with about 100 flights per day.
The French domestic market is dominated by state-controlled Air France, and by the state-owned high-speed rail network.
Swissair owns 49 per cent of AOM and Air Liberté but has higher financial commitments than those of Marine-Wendel, because of a complicated arrangement to keep them under majority European Union control demanded by law. Switzerland is not an EU member.
All three airlines affiliated to Swissair – AOM, Air Liberté and Air Littoral – are in trouble. The Swiss group has already cut off funds for Air Littoral and has provided finance for the other two only until the end of the month, although it had offered to support an FFr3bn ($394m) restructuring plan provided Marine-Wendel followed suit.
Mr Gayssot drew a contrast between the privately-held airlines and Air France, which he said was "working well" under majority state control. AOM and Air Liberté, however, are suffering at least in part because of intense competition on domestic routes from Air France and the railways.
