Unions representing striking French pilots have rejected Air France-KLM's move to delay the contested roll-out of its low-cost operations and vowed to stay on strike in defence of French pay and conditions.
The strike over the proposed expansion of the group's Transavia unit started on 15 September, with the airline estimating that the dispute was costing it up to €20m a day.
Aiming to avert what he called "catastrophic consequences" for the firm, CEO Alexandre de Juniac said he would postpone new foreign hubs for Transavia until the end of the year in order to buy time for detailed talks.
However he also said there had been no progress in talks with the unions and threatened to abandon a 2007 deal on the rollout for Transavia in France, moving instead more quickly to add planes and recruit pilots regardless.
Air France, a part of the Air France-KLM group, said it expected 41% of its flights to operate today, adding that it would have to review its 2014 earnings targets once the dispute finished.
The pilots union SNPL called de Juniac's proposal "unacceptable" and an attempt "to put out a fire by blowing on the embers".
The smaller of the two main pilots union, SPAF, said it also rejected the management position.
Facing an array of low-cost European rivals, Air France announced this month that it planned to beef up Transavia, more than doubling passenger numbers to 20 million by 2017 and developing a significant part of the business outside France.
The dispute highlights discrepancies in wages, labour conditions and welfare coverage between European countries which are theoretically part of a single market for goods and services, but in fact compete with each other for jobs.
In each hub where Transavia operates, pilots would work under local employment terms, which entail higher wages and more favourable conditions in France than in, for example, Portugal.
The management statement stressed that developing its own low-cost service was vital to the carrier's financial health.
"To remain in the race in Europe, we have no alternative than to rapidly expand Transavia," it said.
Among union demands are that Transavia employ pilots under Air France terms. The company has rejected these, and said they would "inevitably lead Transavia France to failure".
The main SNPL union has already extended strike action to 26 September SPAF has extended its strike to 24 September with an option to prolong it further.
Earlier, the French government renewed an appeal for a quick end to the strike and urged management to "clarify" things.
"Service must resume now," Jean-Marie Le Guen, minister in charge of relations with parliament, said ahead of the latest round of talks due today between unions and management.
Air France-KLM is currently expected to post 2014 earnings before interest, tax, depreciation and amortisation (EBITDA) of €2.28 billion and pre-tax profit of €79m, according to the average of analysts' estimates on Thomson Reuters Eikon.
Transavia posted a €64m operating loss in the first six months of this year, €10m more than a year earlier due mainly to the ramp-up of Transavia France. Passenger traffic rose 6.9% year-on-year.
