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French govt ups pressure for end to Air France strike

The French government made a renewed appeal on Monday for a quick end to an Air France pilots strike which is costing the flag-carrier millions of euros a day, urging management to “clarify” its proposals.

The strike over the airline’s plans to establish low-cost activities is entering its second week and set to be the longest such industrial action in its history. The main SNPL union has extended strike action to Sept. 26 and a second union, SPAF, to Sept. 24 with an option to extend further.

“Service must resume right now, that’s what the country wants and all those involved must understand that,” Jean-Marie Le Guen, minister in charge of relations with parliament, said before new talks on Monday between unions and management.

“Very quickly, the management must make a certain number of clarifications on their proposals,” he added.

The pilots are protesting over plans to expand the low-cost operations of its Transavia unit by setting up foreign bases as Air France seeks to fight back against fierce competition from budget carriers.

The expansion of Transavia is part of a new plan unveiled this month aimed at boosting earnings. The proposals would see Transavia’s fleet rise to 100 jets by 2017, from about 50 now, and the number of passengers more than double to 20 million.

The SNPL is concerned Air France would abandon Transavia’s development in France altogether, blaming it on pilot opposition, to focus on the unit’s expansion elsewhere in Europe, thus moving jobs outside the country.

Air France, part of Air France-KLM, expects 41 percent of its flights to operate on Monday. SNPL said ahead of the new meeting that talks had reached “a complete impasse”.

The industrial action began on Sept. 15, and Air France estimates it is costing the company 10 million to 15 million euros ($13-19 million) a day, implying the cost of the walkout could rise to as much as 180 million euros by Sept. 26.

Air France-KLM is currently expected to post 2014 earnings before interest, tax, depreciation and amortisation (EBITDA) of 2.28 billion euros and pre-tax profit of 79 million, according to the average of analysts’ estimates on Thomson Reuters Eikon.

The StarMine SmartEstimate is for a full-year pretax loss of 19 million. The airline forecast 2014 EBITDA of 2.2-2.3 billion euros and has not given new forecasts since the strike began.

Transavia posted a 64 million euro operating loss in the first six months of this year, 10 million more than a year earlier due mainly to the ramp-up of Transavia France. Passenger traffic rose 6.9 percent year-on-year.

Air France’s share price shed about 3.0 percent in early market trading on Monday.

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