Benjamin Smith: a good choice for Air France-KLM?

Unless there is a last-minute surprise, Air France-KLM is expected to confirm the appointment of Benjamin Smith, the current number 2 at Air Canada, as CEO this afternoon. I say except in the case of a surprise, because in the psychodrama of the search for a new president after the resignation of Jean-Marc Janaillac and the stormy internal context of the business for years, the worst can never be excluded.

Not yet appointed, the young forty-year-old is already causing a fuss. Is he the right person to save Air France-KLM (because that is what is at stake)? Let us first ask ourselves why it was so complicated to find a successor to Jean-Marc Janaillac.

Air France… is France….

One of the reasons why there was no rush at the door is the ambiguous situation in which Air France finds itself because of a shareholder as useless as it is cumbersome: the State. As a private, listed business operating in a global market, Air France must continue to maintain the illusion of a French-style social model. Suicidal in a highly competitive market but, in fact, the boss of the Franco-Dutch airline is not free to make radical decisions. For example, moving the headquarters from Paris to Amsterdam, which would save the airline at least 800 million euros per year, is just not feasible.

“When you pay peanuts you get monkeys”

If the issue of sailors’ salaries has been in the headlines for a long time for many good and bad reasons, there is less talk about another problem: the salaries of non flying staff, including managers.

This may come as a shock to some, but for a CEO of a business like Air France, the €1.1 million paid to Jean-Marc Janaillac in 2017 (€500 fixed, €610 variable) makes the job more of a priesthood or volunteerism than a career choice. As an example, since we have to look at things from a market perspective, Michael O’Leary (Ryanair) received 2M€, Willie Walsh, from IAG (British Airways, Iberia…) 4,53M, Carolyn McCall (Easyjet) 8M, Carsten Spohr (Lufthansa) more than 2,7M. So you will tell me that we are talking about managers of airlines that are much more efficient than Air France and that the gap is therefore justified. But you can’t catch flies with vinegar and recruiting the one who will bring Air France up to the level of its competitors has a price. The 3.3M€ offered to Benjamin Smith is neither shameful nor exorbitant in this context, it is just a realignment on the market. Maybe if such a decision had been taken a long time ago, Air France would have been able to afford real business leaders instead of technocrats with a vague sense of the private sector for more than 10 years.

But this hides another reality: Air France pays its non-flying employees much less than market prices, and the CEO should not be the tree that hides the forest. There is a real problem for Air France in attracting young talent, and even in retaining those who have grown up there. Changing the general is useless if you don’t strengthen the army.

A minefield

Add to all this a difficult context: fleet renewal and cabin renovation at a standstill due to lack of cash (we will see the consequences in the long term), tense social context at Air France, cordial disagreement between Air France and KLM, which is doing well and is starting to get tired of dragging its French ball and chain….

In short, there are so many reasons why few candidates jostled for a poorly paid suicide mission where one risks receiving more blows than laurels.

That said, now that the rare bird seems to have been found, is it a good choice?

An airline man or an outsider?

One of the only things everyone agreed on was that we needed a man who knew the airline business. Benjamin Smith’s track record speaks for itself. You don’t become an air transport strategist overnight by landing from nowhere. But we can also think that it was a false problem: well supported, an entrepreneur or captain of industry profile can succeed anywhere…but only if you have the right advisors. Didn’t Richard Branson build Virgin Atlantic without knowing anything about the industry?

But we will give the nomination committee credit for not wanting to play the lottery when time is short and the airline has no room for error.

Manager or entrepreneur?

Many voices have been raised against a possible overly technocratic recruitment that the business has long been fond of. And for good reason: the presence of the State as shareholder favors the recruitment of consensual, politically correct senior civil servants or servants of the State who need to be rehired somewhere.

For once it is a real manager who arrives at the head of the Franco-Dutch group and it is a good thing.

Let’s take the example of Anne-Marie Couderc who devoted herself to be the president of the group for a few months. We heard that she was the right person “and that she knew the house well because she was a member of the board of directors”. That’s the problem with these profiles: they are administrators, not entrepreneurs or managers. Anyone who knows the difference between a board of directors and an executive committee will understand what I mean. They are managers, administrative profiles, who validate and control the execution of a strategy, not business leaders who make a strategy, lead people and move the lines. They are asked to be reassuring, not enterprising. They are asked to calm the ardor of overly impetuous leaders, not to set the machine in motion themselves. They are very qualified to administer, to run a business that runs itself in a stable and non-competitive environment, not to be disruptive and set the spark that will make things happen.

Benjamin Smith is a businessman first and foremost, so this is a good thing.

Internal promotion or external recruitment?

The extent of the technocracy at Air France meant that, by definition, the choice of a businessman left little room for internal promotion. If we take age into account, I don’t believe that there is such a profile at Air France today who is capable of taking the job and is under 50 or 55 years old. Ite missa est.

But a “in house” recruitment could have been the return of one of the prodigal children of the airline: aThierry Antinorior aPascal de Izaguirre for example. If their names were mentioned, nothing says that they were candidates, nothing says that they would have accepted the proposed package, nothing says that they were ready to put themselves in such danger.

On the other hand, one of the tasks of the future general manager, as I said above, will be to avoid that the talents of the airline do not flee as this golden generation did. By proposing promotion circuits and career plans that will allow forty-somethings to quickly reach the highest responsibilities?

In any case, it is also beneficial to bring a fresh perspective from the outside into a business where the seniority of many senior managers and the predominance of certain educational backgrounds is an obstacle to the renewal of ideas.

French or foreigner?

With the appointment of Benjamin Smith, a myth is shattered: that of a French leader for the French air transport industry leader. A sacrilege?

First of all, Air France is a Franco-Dutch group and when you see KLM’s contribution to the group’s margin, you think that the political weight of the French is often inversely proportional to their economic performance.

Major partners such as Delta and China Eastern are also present in the capital of Air France KLM. They have staked a lot on their European ally in an alliance and joint venture strategy and are therefore primarily concerned by the direction Air France-KLM will take. A leader who is able to put the business back on track and who has a global vision is of course more favored.

No one complains today about what a Lebanese-Brazilian has done with a Renault that was once on the brink of collapse.

In 2018 it is surprising that the nationality of the executive is a topic of discussion in a world where the talent market has long been global. Except if you want to protect some corporatist interests, but then we are getting away from business.

Benjamin Smith an excellent choice….for now

Today the choice of Benjamin Smith seems to be a good one. Maybe not the only good choice but it is part of it. Young, international, proven experience in negotiating and launching offers, more business than techno, knowing the workings of the industry…

However, one man alone cannot do everything and given the situation of the group, he will be judged by his results. He will have to find people to support him and make decisions that are not necessarily obvious and that will certainly not please everyone. If in the past it has been able to negotiate agreements, it was not on the soft consensus, so it’s what Air France-KLM needs. Others have failed before him and he will have to show his ability to reform the business structurally, change its culture and to a certain extent change the people.

All that for this

Nevertheless, a feeling of waste prevails. Couldn’t we have made this type of choice at the end of the Gourgeon era or even at the end of the Blanc era? Why did you lose the De Izaguirre and other Antinori?

And more pragmatically, why not simply appoint the chairman of KLM to head the group? Because it was politically unacceptable? This sums up the problem in a nutshell: at Air France-KLM, politics too often takes precedence over business, even if it means discouraging the most committed and brightest employees.

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.
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