Air France's Big Challenge
By AGIS SALPUKAS
Published: Sunday, December 27, 1992
WHEN an Airbus A300 takes off for Air France, three crew members crowd into a cockpit designed for two. The French carrier is the only airline in the world to have a flight engineer in an aircraft on which new instruments and automation have made the job superfluous.
The engineer's presence is a blatant example of how union strength and the French tradition that people should not be thrown out of work, even though their usefulness has ended, make the state-owned carrier appear woefully unprepared for the deregulation of Europe's airline industry, beginning Jan. 1.
In contrast, the labor and benefit costs of now-private British Airways are about 40 percent lower. British Airways has also made huge strides in revising work rules, raising its productivity.
At the same time, United States carriers including American, United and Delta are rapidly expanding in Europe. With their lower labor costs, huge domestic systems that allow them to feed their flights in their home market and long experience in the fast-changing and often ruthless conditions of deregulation, they are putting pressure on Air France and other European carriers.
Nevertheless, Air France has hidden strengths that could enable the carrier, which ranks third in the world in operating revenue, to be one of the survivors in a brutal process of consolidation in Europe.
The carrier has a strong, loyal, even growing, market in France, and it has acquired two domestic airlines, Air Inter and Uta, which are beginning to feed its international flights. It also has a strong hub at Charles de Gaulle Airport outside Paris, where a terminal is being built to link the airport with France's high-speed trains.
It is on these strengths that Bernard Attali, the 49-year-old president of Groupe Air France, must build while getting his airline into fighting trim and avoiding what he sees as destructive aspects of deregulation.
The hub is particularly important because starting Friday European carriers will be able to expand into each other's markets and to set fares as they want, much as American carriers began doing when deregulation was introduced more than a decade ago.
Consequently, European carriers are bracing themselves for fare wars, ruthless struggles to dominate major routes like Paris to London and the shifting of traffic to a few big hubs and a handful of carriers.
These trends -- familiar to American airline executives -- strike fear into the hearts of their European counterparts. Most say deregulation in the United States has led to a decline in service to passengers and the evolution of a small group of carriers with the potential to act as an oligopoly.
"We play the game," Mr. Attali said of the coming deregulation in an interview earlier this month in his office on the 15th floor of Air France headquarters near a major rail center in Montparnasse in Paris. "It's a stupid game," he continued. "No one knew at the beginning of the game that it would be a killing game." Nevertheless, he has tackled the toughest part head on -- shedding jobs.
Mr. Attali, who was brought in four years ago to revamp the airline after a career in government and finance, has even consulted Frank Lorenzo, the former chairman of Texas Air who slashed labor costs at Eastern Airlines after Texas Air bought that carrier.
In the end, however, Mr. Lorenzo's bitter fight with the unions led to Eastern's liquidation. Mr. Attali favors less confrontational methods than Mr. Lorenzo's, but he admires the American's willingness to become a pariah in the eyes of many to do the cost-cutting he thought was necessary.
"I like people who do what they have to do," he said. "If you do the job, whatever happens, then you are a real leader." Mr. Attali had a chance to put that philosophy to work earlier that day as union leaders and representatives of several hundred demonstrating workers came to his office to protest upcoming layoffs.
At the end of the meeting no one was happy, and many of the protesters were shouting, "Attali must go."
Several days later, he and his staff met with union leaders again to give them a list of some 250 workers who may soon be laid off, the first such mass dismissal since Air France was founded in 1933.
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