His style in labor disputes may be just the ticket for French competitiveness

By THOMAS SANCTON

n a World Cup opening day marked by two own-goals on the field, the pilots of the tournament's official airline managed to score a third: after a 10-day strike that cost state-owned Air France more than $160 million, disrupted the plans of thousands of travelers and tarnished the image of France in the full glare of world attention, the main pilots' union suddenly capitulated. The strike-ending deal, thrashed out in a secret, all-night bargaining session, bore the trappings of compromise. But in the end, the pilots accepted what they had always considered anathema: a plan to cut costs by some $83 million a year by holding down wages.

Despite the blow to French prestige, the strike's effects could have been worse. If the pilots had dug in, they could have seriously perturbed the World Cup, spawned copycat walkouts, and run Air France back into the red just as the chronic money-loser was returning to profitability.

The government of Socialist Prime Minister Lionel Jospin had been faced with a dilemma: it could capitulate in the face of a determined special interest group, as successive conservative governments did in the past, and risk the ruin of the state airline; or it could abandon its socialist principles and try to break the trade union movement, as Ronald Reagan did to U.S. air traffic controllers in 1981--a dangerous course in France, where the right to strike is sacrosanct.

In the end, Jospin found a third way. He voiced firm support for the airline's cost-cutting objectives but left it to the management to negotiate the details. Once the pilots realized that they could not count on the complicity of a leftist government--and that the sympathies of the public were not with them--they were reduced to cutting the best deal they could. In place of a management plan to slash their wages by 15% in exchange for 10% of the shares to be offered when the airline is partially privatized later this year, they accepted a seven-year wage freeze and an optional wages-for-stock offer. Instead of a two-tiered salary scale that paid recent hires less than their predecessors, they accepted a roughly equivalent arrangement whereby novices would have part of their pay withheld to help cover their training costs.

The bottom line is that the airline should still be able to get the pilots' wage bill down by 15% over seven years to help finance a $6.7 billion modernization plan that includes the purchase of 75 new jetliners. Without such cost-cutting and upgrading, analysts say, Air France would be unable to compete in Europe's newly deregulated skies--especially since the European Commission has forbidden further government subsidies. "It's the end of monopolies," says Eric Chaney, a Paris-based analyst at Morgan Stanley. "Today's reality is open competition, deregulation and privatization." Despite the leftist government's reluctance to give up state control, the logic of the market and the need to form alliances is likely to push Air France into the private sector in the long run.

Going after the overprivileged cockpit crews was an economic and political no-brainer. After reducing wage costs among the airline's other 42,000 employees, it was imperative to rein in the salaries of its 3,200 pilots who earn an average of about $145,000 a year--40% more than Lufthansa pilots and 20% more than those at British Airways.

The walkout was based on a series of disastrous miscalculations. The main pilots' union had counted on the knee-jerk support that the French public almost always gives any strike. But polls showed this to be the most unpopular labor action in recent memory, with only just over one-third of those surveyed backing the movement. The pilots found themselves isolated even among Air France employees. Union leaders assumed that a work stoppage during the World Cup would bring the government to heel. In fact, many soccer fans were able to switch to trains or rival airlines, which laid on extra flights and racked up unexpected profits. Finally, the pilots banked on the perceived weakness of Lionel Jospin and the sympathy of his Transport Minister Jean-Claude Gayssot, a Communist who had vowed that he would never be "the Minister of Privatization."

They were wrong on that score as well. Despite his deep social democratic convictions, Jospin has shown himself to be a pragmatist who understands the logic of competitiveness and has already pushed through the partial privatization of France Telecom--another state-owned behemoth--with remarkable success. In fact, this leftist leader may be able to do what his conservative predecessors could not: face down France's powerful public sector unions and bring them in line with the imperatives of the international marketplace.

Jospin will never ride roughshod, like Reagan, over any category of workers. But if his gentler method keeps working, he may not have to. "Jospin has proved that he can be firm and win," says political analyst Alain Duhamel. "This will be a deterrent to other public sector movements." That is the main lesson, and the unexpected good news, that came out of a week that had begun very badly for France.