Air France inks pay deal in milestone for new CEO

PARIS (Reuters) - Air France-KLM's <AIRF.PA> new Chief Executive Ben Smith struck a pay deal with French unions on Friday, drawing a line under a protracted standoff that had led to costly strikes and the abrupt departure of his predecessor earlier this year.

Five out of seven recognised unions at Air France signed the wage deal providing for a 4 percent pay increase in two stages, the company said. However, the largest Air France pilots' union, SNPL, was not among the signatories.

With the endorsement of unions representing 76.4 percent of staff, the pay agreement becomes binding and will be implemented, the company said.

Upon taking over last month, former Air Canada chief operating officer Smith re-opened talks on a dispute that had wiped 335 million euros ($384 million) off group earnings as workers demanded a 5.1 percent raise to offset past inflation.

The deal announced by Air France-KLM on Friday includes a 2 percent pay increase back-dated to the start of 2018, followed by a further 2 percent on Jan. 1, 2019.

"I would like to thank everyone involved at Air France for the quality of our discussions over the past few weeks, and for the trust that has prevailed throughout," Smith said in the company statement.

The agreement comes as Ireland's Ryanair <RYA.I>, Europe's biggest budget carrier, also said on Friday it had reached a deal with British, Portuguese and Italan pilots to end a series of strikes that have hurt its business.

Squeezed between long-haul Gulf carriers like Emirates and a proliferation of low-cost regional rivals, Air France-KLM has struggled to overhaul costs and services the way British Airways parent IAG <ICAG.L> or Lufthansa <LHAG.DE> have done.

The SNPL union, which had demanded assurances that the second 2 percent hike would not be counted towards 2019 pay awards, said it had withheld its signature because the deal remained "ambiguous" on this point.

In its statement, the French carrier said its next annual pay talks in October 2019 would be "based on the global economic environment, the present situation of the Air France-KLM group (and) the company's economic performance".

In addition to the company-wide pay deal agreed on Friday, Air France pilots are pressing their own demands for supplementary pay increases, which have yet to be addressed.

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(Reporting by Laurence Frost and Cyril Altmeyer, editing by Louise Heavens and Emelia Sithole-Matarise)