The Air France Challenge
May 24, 2018
It sounds like a scene from the torrid days of airline deregulation that made so many headlines in the 1980s: Unhappy unions, with strikes threatening to bring an iconic airline company to a near-standstill. A CEO who resigns. And in the middle of all this? Travelers scrambling to figure out the best way to secure their next vacation.
The carrier in this case is Air France, and while its challenges are not new, the partially state-owned airlines got an important piece of news recently from French president Emmanuel Macron. His message: You are on your own.
It’s part of a transition that has changed the entire industry over time. And what a strange industry indeed. “For really most of the existence of airlines, they haven’t been a business in the traditional sense,” says Michael Bell, head of Korn Ferry’s Civil Aviation practice, based in Miami. In particular, that manifested in lack of earnings. “Until recently, the cumulative profits for the industry was negative; you don’t see that in other industries.”
But that lack of focus on generating cash is changing as the sponsors of such airlines, tired of spewing out money, finally cry uncle. Some countries that used to have national airlines no longer do so, such as Peru. Others, such as Finland’s carrier Finnair, have changed the way they operate to fill a niche that works for them, says Bell.
Then there are some, such as Italy’s Alitalia, that are flying in a gray area. “It is caught in a no-man’s land between being a private company and still being a symbol of national importance and national interest,” he says. Meanwhile, the company still has to compete in a market with lower seat prices and brutal competition. That company’s limbo-like status makes it an uphill struggle for anyone to institute change in such an organization. “That’s the challenge for airlines that are historically national airlines,” says Bell.
“Now Air France competes with many other airlines that have emerged from scratch,” says Paris-based Gérald Bouhourd, Korn Ferry’s managing partner for global industrial markets. “The future CEO could be on his own, but main priority should be to put the client in the middle of the game and educate everybody.”
For the next Air France CEO, as for any CEO of a legacy carrier, probably the first thing to do is to engage in meaningful dialogue with unions. “I think the next person who would take this job would need to show some give and take,” says Annie Bader, managing consultant for consumer industries in Korn Ferry’s Paris office. That might mean involving union leaders in the decision-making process. “That way they feel responsible, and it probably makes them feel they are involved,” she says.
Above all, Air France’s new leader will likely need to have excellent relationship management and communications with the workforce along with a good handle on national politics, says Frankfurt-based Christian Weiss, Korn Ferry’s senior principal on the global leadership team for workforce planning. “The Air France situation is part of the government’s reforms,” he says. French labor markets are well-known to be inflexible, which is a fact that French President Macron is trying to change. “The majority of employees don’t understand the situation they or the company are in, because generally the aviation sector is growing and there is a major lack of critical resources in the industry,” Weiss says. Explaining the economic changes in the industry, the new absence of a government lifeline, and the need to become competitive or be grounded, all in a manner that will get heard, will take some finely-honed skills for Air France's new leader. “It’s a hell of a job,” he says.