French Transport Minister Alain Vidalies said today that Air France-KLM had withdrawn a project to expand its low-cost Transavia arm.
The Minister went further than the company's management which has sought to insist the plan is only suspended.
Pressure has mounted on Air France-KLM to drop the expansion plan in the face of a strike by pilots who are worried the low-cost unit will suck away jobs and erode their pay and conditions.
Earlier this week it suspended the roll-out to the end of the year pending more discussions with unions.
The walkout entered its tenth day today, with Air France expecting to operate only 46% of flights. The airline has said it is costing it up to €20m a day.
"The Transavia Europe project has been abandoned," Vidalies told RMC radio. "It isn't suspended for three months, it's been withdrawn by management."
Reacting to the minister's words on Europe 1 radio, Air France chief executive Frederic Gagey echoed the words of parent company Air France-KLM's head Alexandre de Juniac earlier this week, saying the project may eventually have to be dropped, but only if talks with the unions fail.
The French state has a 16% stake in parent group Air France-KLM and Prime Minister Manuel Valls has called for the end to a strike he fears will damage France's image abroad.
De Juniac has said the company's plan to expand Transavia in Europe is crucial to fight competition from other low-cost players.
Pilots' unions have threatened to prolong their walkout indefinitely as long as management presses ahead with the plan. The pilots fear that the move - particularly for those hubs that will hire pilots outside France in countries such as Portugal - will end up eroding their pay and conditions.
