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Air France CEO says strike could kill Transavia project

The labor dispute with French pilots over the launch of Air France-KLM's low-cost airline Transavia in Europe could force management to abandon it, the company's chief executive Alexandre de Juniac said on Tuesday.

Speaking as a strike costing up to 20 million euros($25.7 million) daily entered its ninth day despite his promise to suspend the project to the end of the year, de Juniac said he was deeply reluctant to abandon a launch he sees as crucial to fight competition from other low-cost players, but that he might have to.

"We are suspending, and if we cannot reach an agreement we will be obliged, dying in our souls, to abandon the project," he told France Inter radio.

Earlier on Tuesday, French Prime Minister Manuel Valls repeated his backing for the Franco-Dutch management and said "The conditions seem to me to be in place for a convergence of the positions of the parties."

"There is no sense in the strike. French people do not understand it. It represents a real danger for the company." Valls said on Europe 1 radio.

Air France-KLM wants to develop Transavia, with hubs in France, the Netherlands and Europe, in an attempt to maintain market share for Europe's second-largest carrier by revenue in the face of fierce competition in the sector.

However, Air France pilots fear that the move - particularly for those hubs that will hire pilots outside France - will end up eroding their pay and conditions, which are among the best in Europe.

The strike has grounded about 60 percent of Air France flights on most days since the strike began. Air France said it would be running about half its flights on Tuesday.

Shares in Air-France KLM dropped 5 percent on Monday as the dispute appeared to deepen.

De Juniac said he was determined to press ahead with Transavia in France with or without union backing, but offered suspension of the European arm of the venture until December along with further talks. Pilots' unions, however, stuck to their strike plan.

Shares in the company were little changed in early trade on Tuesday.