September 27, 2019 / 11:55 AM / 18 days ago

Air France-KLM CEO sees upside to French airline bankruptcies

TOULOUSE, France (Reuters) - Air France-KLM (AIRF.PA) boss Ben Smith on Friday defended his decision not to fly to the aid of two collapsed French airlines, and said market consolidation through bankruptcies would eventually benefit the country’s aviation industry and jobs.

Logo of Air France is pictured on an Airbus A350 at the builder's headquarters in Colomiers near Toulouse, France, September 27, 2019. REUTERS/Regis Duvignau

Air France last week withdrew a rescue bid for Aigle Azur, which was formally wound down on Friday, and has since rebuffed overtures by XL Airways, another insolvent carrier.

“There is going to be consolidation,” the Air France-KLM chief executive told reporters at a ceremony in Toulouse marking the delivery of Air France’s first Airbus A350 jet.

“We believe positive results will come out of it, to ensure that airlines that are based here in France will be stronger to compete globally,” Smith said. “The jobs associated with those larger more powerful airlines will be created here in France.”

While six airlines currently compete on London-New York routes, the smaller Paris-New York market is contested by 10 rival carriers, the CEO said.

Air France now stands to pick up some of Aigle Azur’s valuable take-off and landing slots at Paris Orly airport, after a bankruptcy court rejected the last two remaining bids for the failed airline on Friday, effectively sealing its fate.

Smith was speaking at the end of a week marked by travel firm Thomas Cook’s failure, which affected 600,000 holidaymakers and send shockwaves across the sector.

A long line of small European airlines have also run into trouble faced with industry overcapacity, cut-throat competition and high fuel prices. Germania, Flybmi and Iceland’s WOW have all failed this year, while Slovenia’s Adria Airways has canceled almost all its flights this week.

Willie Walsh, CEO of British Airways parent IAG (ICAG.L), has also said that bankruptcies among competitors would help support the group’s growth next year.

STRANDED

Aigle Azur, which stranded 19,000 passengers when it abruptly halted its services earlier this month, operated with 1,150 staff and a fleet of 11 Airbus jets serving Algeria and other destinations in north Africa and beyond.

Air France had discussed a joint Aigle Azur bid with Air Caraibes parent Dubreuil Group, but pulled out after concluding that it would require a complex deal with its own unions. EasyJet (EZJ.L) also withdrew an earlier offer.

The French flag carrier has also resisted entreaties by XL Airways CEO Laurent Magnin to acquire the failed airline, its 570 staff and four Airbus planes.

XL Airways has been given a Saturday deadline to present any rescue offers to a bankruptcy court north of Paris.

Slideshow (3 Images)

Franco-Dutch Air France-KLM remains skeptical of the low-cost, long-haul market plied by XL, Smith said. “I don’t believe today the XL model offers something that would complement Air France.”

While both Aigle and XL had some “interesting assets”, Smith said absorbing either would have endangered labor relations at Air France, which last year lost 335 million euros ($366 million) to a wave of strikes.

“We have a stable social environment today in Air France, and we’ve made it clear we’re not going to jeopardize that,” he said.

Reporting by Laurence Frost; Editing by Kirsten Donovan and Sonya Hepinstall

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