Air France backs down on creating new low-cost unit

[TOULOUSE] Air France proposed to immediately drop a low-cost subsidiary outside its French and Dutch home bases, a plan that had riled French pilots and led to a 10-day strike that management called "destructive".

Management offered to withdraw the creation of a Transavia Europe subsidiary, and will focus instead on further developing Transavia France, a plan the airline said is "a 100 per cent pro-France project" because it avoids potential relocation and instead creates more than 1,000 jobs at home, according to a statement on Wednesday. In return, pilots should end their strike.

The Transavia Europe project aimed to set up a unit to compete with the likes of EasyJet plc and other low-cost carriers that have chipped away at short-haul routes of European legacy airlines. Pilots started their strike on Sept 15 and voted on Thursday to extend the walkout until Sept 30, in a battle that Air France said cost it 20 million euros (S$32.5 million) each day and and has thrown its earnings goal into disarray.