Air France Dispute Threatens to Escalate Macron’s Battle With Labor

PARIS — In the first year of his presidency, Emmanuel Macron has pushed an ambitious set of business-friendly labor laws through Parliament, made it easier for companies to hire and fire, cut the wealth tax and decentralized collective bargaining. Through it all, France’s most militant unions have resisted.

His changes, which set out to reshape the way France’s economy and society work, are facing increasingly strong criticism from labor groups. For weeks, unions have staged a series of strikes to oppose efforts to make the nation’s main railway system, the SNCF, more competitive. And in a symbol of a widening divide between workers and companies and the French state, unions representing Air France-KLM staff on Monday called for new strikes after rejecting a pay proposal.

While Mr. Macron’s economic changes do not take aim at the nation’s flagship air carrier, weeks of parallel strikes at Air France and SNCF are emerging as a test of his ability to stick with pledges to enhance France’s economic competitiveness and global leadership, which helped usher him to an electoral victory last May.

The call for strikes at Air France has prompted the abrupt resignation of the airline’s chief executive and, in particular, ignited a conflict with the French government, which warned labor leaders that they risked driving Air France to the brink of calamity.

The standoff, which has already cost the airline an estimated 300 million euros, or $360 million, in lost revenue, helped drive the company’s share price 13 percent lower on Monday. France’s finance minister, Bruno Le Maire, warned that the company might “disappear” if unions persisted in their demands for an immediate 5 percent wage increase and continued rolling strikes that have already affected tens of thousands of fliers worldwide.

The French government, which owns a minority stake in Air France, would not ride to the rescue with a taxpayer bailout if the airline faltered, Mr. Le Maire said.

“I am not taking the money of the French and putting it in a company that isn’t at the required competitive level,” he said.

The battle highlights efforts by Mr. Macron to remake France’s economy. He has rammed a series of controversial changes to France’s notoriously rigid labor laws through a Parliament stacked with members of his En Marche party, starting with a measure this year to make it easier for private companies to fire workers. Mr. Macron is also tilting at the unemployment and pension systems with controversial changes to reduce costs.

In the midst of his drive, he is also challenging France’s most time-tested institutions head-on. In March, he began negotiations for an overhaul of the heavily subsidized, debt-laden French rail system, targeting jobs-for-life schemes and benefits that are among the most generous of any profession in France in a bid to open the system to competition by 2020.

Mr. Macron’s moves have been cheered by businesses and investors, and have drawn companies including Facebook and Amazon to step up a presence in France. But they have also sparked fear and anger among swaths of French society. Many workers worry that the financing of the country’s cherished safety net will be plucked away and transferred to business, for the profit of shareholders.

Even some analysts warn that the government may be going too far, by shifting the balance of power toward employers and greatly eroding the power of unions. The unions have been spoiling for a fight.

In many ways, that has been Mr. Macron’s point. Although only around 8 percent of the nation’s workers are unionized, organized labor has long held outsize clout at the negotiating table with employers. In France, even small changes tend to agitate unions, which have historically sought to secure workplace protections through protests and strikes.

Before pushing through changes to the labor laws, Mr. Macron held more than 50 meetings with unions shortly after his election in an effort to get them onboard with his program.

The General Confederation of Labor, known as the C.G.T., has largely resisted, seeing an effort to repeal hard-won labor rights. The union has been at the forefront of mobilizing actions that in recent weeks have led hundreds of thousands of people into the streets, and encouraged regular strikes at the nation’s railway system that are scheduled to last until July.

The more moderate French Democratic Confederation of Labor, France’s largest union after recently overtaking the C.G.T. in membership, has pushed for a more flexible approach as the forces of globalization change the competitive landscape.

At Air France, the government pushed back against labor groups over the weekend after the chief executive, Jean-Marc Janaillac, resigned abruptly on Friday. Mr. Janaillac had failed to win workers over in a contentious internal referendum that proposed a 7 percent pay increase for pilots and staff over four years.

Air France’s hard-line pilots’ union had demanded an immediate 5 percent raise to make up for wages that have been frozen for nearly five years. The company has recorded record profits thanks to lower oil prices since 2016, prompting the union to insist that Air France could afford the pay increase.

The clash was at least a far cry from a standoff between employees and managers in 2015, when a mob of angry workers stormed a meeting on job cuts and ripped the shirts off two top executives, who escaped over a chain-link fence for safety.

Still, it has set up a dangerous game of brinkmanship between unions and the French government, which has hinted that it is willing to let Air France go under.

“If it doesn’t make the necessary efforts to be at the same competitive level of Lufthansa and other major airlines, it will disappear,” Mr. Le Maire said on the French television station BFM on Sunday. He added that the union’s salary demands were “unjustified” and urged employees to show “responsibility.”

Such talk is reminiscent of Mr. Macron’s overall approach to overhauling the economy. Some analysts have criticized the way he has pushed through changes to the labor laws, most of which have been done by the equivalent of executive order, raising questions about how democratic — or not — his methods have been.

One year into his presidency, Mr. Macron is routinely referred to in the French media as Jupiter or Napoleon Bonaparte, when he is not being compared to French kings. This weekend, thousands of demonstrators amassed in Paris to express anger at what they called a “soft dictatorship,” while brandishing a portrait of King Louis XVI with Mr. Macron’s face Photoshopped in.

“Emmanuel Macron is walking a fine line between the rehabilitation of a certain presidential authority and authoritarianism,” Jean-Claude Monod, a specialist in political philosophy, said in an interview published Monday in the French daily Le Monde. “One has the impression of a deafness in front of forms of protest or political experimentations, of a will to use force for his reforms.”

Content originally published on https://www.nytimes.com/2018/05/07/business/air-france-macron-labor.html by LIZ ALDERMAN