Trouble in the Air

Lady luck has always seemed to smile on Baron Ernest-Antoine Seillière de Laborde. Born into the wealthy De Wendel family, inheritors of an 18th century iron and steel dynasty, Seillière rose effortlessly through the ranks of France's ruling élite. After taking his degree from the prestigious Ecole Nationale d'Administration, he launched a promising diplomatic career, served on the staffs of two Prime Ministers and seemed destined for a privileged life in the upper echelons of the French civil service.

Seillière's destiny took a sudden turn in 1978: the family holding company Marine-Wendel, shaken by the collapse of the steel industry, turned to him to restore its shattered fortunes. Seillière transformed the creaky industrial artifact into a modern conglomerate with interests ranging from information technology and Internet services to energy, real estate and auto parts. In less than 25 years, he multiplied the company's worth 90-fold to some $1.25 billion.

In 1997, Seillière's path turned again: the powerful French employers' association, now known as medef, tapped him to lead its fight against the Socialist government's controversial 35-hour workweek. Though he failed to block the law, Seillière went on the offensive and demanded a total reorganization of the country's health and unemployment systems that the employers manage jointly with labor leaders. After enlisting the support of some moderate unions, Seillière hoped to force through sweeping reforms that successive governments had failed to enact.

Lately, however, the baron's luck has turned bad: a financial time bomb has exploded under his feet. Seillière's troubles started when a friend persuaded him to invest $40 million for a 51% stake in the private French airline AOM in 1999. Though Seillière knew nothing about the airline business, he was assured that SAirGroup, the parent company of Swissair, would manage everything. More than Seillière's money, the Swiss needed him to serve as majority shareholder because European Union regulations bar non-E.U. investors from controlling E.U. companies. In May 2000, AOM absorbed another independent carrier, Air Liberté, and later Air Littoral in hopes of building up a private airline group capable of competing with Air France.

But the combined company quickly lost altitude. By last December, a new injection of cash was necessary to keep the company afloat. SAirGroup, whose overall business was facing disastrous losses, started pumping $45 million a month into the ailing French company but was unable to convince Seillière to cough up another cent. Though officially the majority shareholder, Seillière insisted that he was only a financial partner and that SAirGroup was responsible for managing the crisis. Declared the baron: "We are not the pilot in this matter, we are the passenger."

If so, the passenger seems to be in for a rough ride. Last February, the Swiss shook up AOM's management team and brought in veteran airline executive Marc Rochet to head the ailing company. He came up with a plan, announced May 21, to stem the losses within three years by cutting unprofitable routes and eliminating 1,328 out of 7,400 jobs. Rochet's announcement triggered a chain reaction of strikes and demonstrations by AOM-Air Liberté employees.

In a stormy meeting last week, Rochet asked the two investor groups for yet another cash injection to fund the $400 million salvage plan. SAirGroup said it would do so only if Marine-Wendel shared the cost. But Seillière's team was unwavering: "It is out of the question that we pay one more franc." With no serious buyers in sight, Rochet seemed ready to throw in the towel and declare bankruptcy. Some analysts predicted that the threat of an imminent liquidation — which could cost the investors at least $800 million — might finally convince SAirGroup to finance the bailout alone. Meanwhile, Transport Minister Jean-Claude Gayssot declared Seillière's position "intolerable" and threatened to take him to court for possible violations of E.U. law by serving as a straw man for the Swiss.

Coming in the wake of other high-profile layoffs in France — notably Marks and Spencer's pullout, eliminating 1,700 jobs, and Danone's shedding of 570 jobs — the AOM debacle casts an unflattering spotlight on Seillière at a critical moment. It cannot help weakening his sputtering efforts to reform the country's social schemes. And before the AOM saga is over, the baron may find that he has lost something far more valuable than a $40 million investment: his reputation as a phenomenally successful entrepreneur. Lady Luck can be a fickle partner indeed.