In 10 years at the helm, Jean-Cyril Spinetta has transformed Air France from a state-owned company considered one of the sick men of European aviation into the world’s biggest airline.

But the quietly spoken intellectual, a product of France’s elite educational institutions with a career that has criss-crossed between public service and business, is standing again at a crossroads.

The process of consolidation among global airlines has been slow and laborious, but in Europe it is Mr Spinetta who has set the pace. His move in 2003 to take over KLM, the Dutch national airline – a deal that was completed in spring 2004 – was the first acquisition of a flag carrier in Europe.

Air France-KLM became the world’s biggest airline by revenues and the “softly, softly” approach to the integration of the two groups adopted by Mr Spinetta and Leo van Wijk, the former chief executive of KLM and deputy chairman of the merged group, has defied the sceptics.

The duo masterminded a process in which they built trust and confidence in the two companies, before gradually combining their functions. It has proved to date a resounding success, albeit one achieved in a benign economic environment.

Sitting in the largely deserted offices of the Air France-KLM holding company in central Paris, a stone’s throw from the sources of French political power and far removed from the hectic environment of Air France headquarters at Charles de Gaulle airport, Mr Spinetta is contemplating his next move. There is much at stake.

“The consolidation process is not finished. There will be other steps,” he says. For the smaller legacy carriers, “the only possibility is to consolidate with others. But what the path will be nobody yet knows.”

The next throw of the dice could reinforce his reputation as one of the shrewdest thinkers in the industry or undermine the progress made by Air France-KLM to date. Before this deal and the subsequent takeover of Swiss by Germany’s Lufthansa, airline mergers had a reputation for being notoriously difficult to implement.

Alitalia, the floundering Italian flag carrier, and Spain’s much more successful Iberia are both in play and Mr Spinetta is eyeing both opportunities. But so are others, including British Airways, already the holder of a 10 per cent stake in Iberia and part of a consortium led by TPG, the US private equity group, which is expected to launch a bid for the Spanish airline later this month.

“Iberia is in good shape, but I understand that the shareholders and management think that consolidation is inevitable and that it is better to anticipate this than to wait and have to act in a more difficult situation...We are in
the phase of evaluating the potential for co-operation with Iberia,” he says. Alitalia by contrast is facing “very strong economic difficulties. A decision has to be taken rapidly.”

The Italian government is desperately trying to find a buyer for its 49.9 per cent stake in Alitalia, while Iberia is seeking to participate in the further consolidation of the European industry from a position of relative strength, much as KLM did at the start of the decade.

Mr Spinetta takes an obvious pride in the role Air France has played in European consolidation. Before the takeover of KLM, the accepted wisdom was that such a move was impossible until the arcane global regulations governing airlines’ international traffic rights were reformed.

His coup was to find an ownership structure that could work even in this regulated environment. “We have demonstrated that cross-border merger is possible, with good economic results, with improving margins and being able to work together.”

When Mr Spinetta drove the deal through, doubts were expressed about the ability of the group’s two hubs at the Paris Charles de Gaulle and Amsterdam Schiphol airports to flourish side by side. “It was difficult to imagine with two huge hubs only 500kms apart. People said Charles de Gaulle would cannibalise Amsterdam or vice versa. But we have shown that one of the strongest assets we have is the combination of these two hubs.”

The success of low-cost carriers is also accelerating the need for consolidation in Europe, Mr Spinetta believes, and this will drive smaller legacy national carriers into the arms of the big three. “They have no real economic model any more.”

Mr Spinetta, who turns 64 this week, arrived in the airline business in 1990 as chairman and chief executive of Air Inter, the French domestic airline. At the time, the French government was trying to merge Air France with Air Inter and UTA to face the competitive threat posed by the liberalisation of aviation inside the European Community.

It was a threat Mr Spinetta understood well after working for seven years as chief of staff for Michel Delebarre, a leading Socialist minister, successively minister of labour, social affairs and employment and finally transport, planning and housing.

From his time in the transport ministry Mr Spinetta, a constitutional lawyer by education and a graduate of the elite École Nationale d’Administration, understood both the great influence of governments in aviation affairs globally and the challenges the then mostly state-owned airlines in Europe faced from liberalisation.

He may now be chairman and chief executive of a private sector group in which the French government’s stake has fallen to about 17 per cent. But by mindset he remains a public servant.

His civil service roots in education, social affairs and employment have shaped his conciliatory approach to dealing with workers and trade unions at Air France, a vital ingredient of his management style in an industry known for its volatile industrial relations.

As a Paris student during the revolutionary years of the late 1960s, Mr Spinetta recalls that he was “one of the left...I read Das Kapital, in French. Marx was studied as a philosopher along with Schumpeter, Keynes and others. It was part of the curriculum.”

It was during his years at ENA and in government that Mr Spinetta formed a network of contacts in the French establishment. In his year at ENA were Louis Gallois, now chief executive of EADS, the Franco-German aerospace and defence group that includes Airbus; Alain Juppé, a former prime minister; and Dominique Perben, a former transport minister. As industry adviser to President François Mitterand in the mid-
1990s, he formed powerful friendships with Anne Lauvergeon, chief executive of Areva, and Hubert Védrine, later foreign minister.

In 1997 he was brought back into the airline industry to head Air France. He took over a carrier only rescued by FFr20bn of state aid in 1994, a chronic lossmaker plagued by strikes. The turnround was started under his predecessor, Christian Blanc, but it is the more studied vision of Mr Spinetta that has turned Air France-KLM into a global force in the space of a decade. And he insists the government does not interfere. “The rules are clear,” he says. “When you are profitable, there is no interference from the French government.”

How performance data disappeared off Air France’s radar screen

On a pitch-black night, a man is searching for his keys on the ground in a pool of light from a street lamp. “Where did you lose them?” asks a passer-by. “Not here,” says the man, “but this is where the light is.”

Jean-Cyril Spinetta tells the story to illustrate the deplorable state of the information systems at Air France when he came in as chief executive in late 1997. The
IT crisis was symptomatic of operational problems across the group. Only months later in June 1998 he was hit by the only big strike of his tenure, when pilots stopped work for 10 days.

“It was just before the World Cup and the company was 90 per cent paralysed. I had no idea until October of the exact sales, the costs, the economic results. It was a black box. Our cost accounting was totally deficient.

Investment in IT “was my first priority – to have a solid robust system for accounting”. he says. “Now it is a pleasure, I know the turnover of two days ago. Now you can manage well or you can manage poorly, but at least you can manage.”

Copyright The Financial Times Limited 2024. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article

Comments

Comments have not been enabled for this article.