Is it a case of plus ça change or will the new French socialist government compromise Air France's planned privatisation and the integration of the Airbus consortium?

The French airline industry is waiting with bated breath to see whether France's new socialist prime minister, Lionel Jospin, is a man of his word. Installed in office in early June, Jospin now needs to prove whether he will marry his pre-election rhetoric of 'neither nationalisation nor privatisation' with the need to repair the country's deficit by selling off some of the state-owned companies, including Air France and Aérospatiale.

General industry consensus is that the arrival of a socialist government and of a communist transport minister, Jean-Claude Gayssot, will simply stall, not stop, Air France's planned privatisation. Eric Kintz, project manager at Roland Berger & Partner, predicts there will probably be an increase of the employees' shareholding in the Air France privatisation. Jean-Louis le Baraillec of Air France's pilots union predicts that while the new government will open up Air France to private capital, it will maintain a majority stake.

The European Commission is itself unsure whether it can claim to have been misled if Air France fails to privatise, admits a senior Commission official. The Commission cleared Air France's massive state aid programme in return for a pledge that 'the process of privatising Air France shall begin once the company's economic and financial recovery has been achieved in accordance with the restructuring plan.' As to when the carrier recovers is 'open to interpretation', the source points out.

James Halstead of Banque Indosuez warns that greater union power, which is bound to ensue under the new government, 'will make it much more difficult to impose the changes needed to make Air France more market-orientated and commercial.'

Unions expect a greater say under the new socialist regime. 'The new government will listen more to unions and give greater importance to the workers', declares Jean Immediato, president of TAT's section of pilots union SNPL.

Union officials are also speculating whether chairman Christian Blanc has a future at Air France. Eric Jirbert, secretary general of Air France Group's main union CGT, says Blanc may be forced out after 'backing the wrong horse' by supporting the former government's proposed privatisation of Air France.

There is also concern over whether the privatisation of Aérospatiale will now proceed as planned. Kintz warns of the need for consolidation, stating that 'the French aerospace industry has no choice but to consolidate internally and with other European partners'. If a failure to privatise Aérospatiale stops Airbus' conversion into a single entity, 'the French and European airline industry will come to a grinding halt', warns analyst Chris Avery at Paribas in London.


Source: Airline Business