Air France strike ends, company to develop low-cost unit

PARIS (Reuters) - Air France pilots called off on Sunday a two-week strike that had cost the airline more than 280 million euros ($355 million), despite continued deadlock with managers over the development of the firm's low-cost operations. The pilots launched their strike in an effort to force Air France's Franco-Dutch parent Air France-KLM to revise plans to expand its low-cost brand, Transavia, fearing that the project would erode their own pay and conditions. However, they came under increasing pressure to return to work, with France's Socialist prime minister, Manuel Valls, denouncing on Friday the pilots' "egotism". "It is our duty as union representatives to know when to end a strike, when we know there will not be any progress," the main Air France pilot union SNPL said. "We are asking pilots to resume flying, knowing that tensions are inevitable, to allow for the climate to calm down." After the strike was called off, Air France said it planned to speed up the development of Transavia, which it believes is vital for the well-being of the company at a time when myriad low-cost airlines are taking root across Europe. "This ending of the conflict reinforces the company's determination to makes its economic model evolve in order to cement its leadership," Air France said in a statement. It added that the project would create 1,000 jobs in France, including 250 pilot jobs. The walkout has grounded up to 60 percent of flights in recent days and Air France said services already canceled on Sunday and Monday because of the strike would remain closed, with a progressive return to normal only expected from Tuesday. Facing growing price pressure, 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 French pilots had tried to convince the company to offer the same contracts to those flying for Transavia as it gives its own pilots, regardless of where they were based. The airline said this was incompatible with the low-cost model. The dispute highlighted discrepancies in wages, labor 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. Air France said it regretted that in spite of lengthy negotiations with the unions, including 15 hours of talks on Saturday, an agreement had not been reached. Valls called on all involved to "reconquer trust" and resume the airline's development "notably through its subsidiary Transavia France which represents an obvious asset in the high-growth market of low-cost" airline travel. The government is a 16 percent shareholder in the group and sits on the board. ($1 = 0.7885 euro) (Reporting by Astrid Wendlandt and Sophie Louet; Editing by William Hardy and Crispian Balmer)