French Minister of Transport Alain Vidalies announced on Wednesday that Air France is abandoning plans to launch a low cost Europe-wide subsidiary Transavia Europe, in a bid to end an Air France pilots' strike which is now it its second week.

"The Transavia Europe project has been abandoned by management," Vidalies told RMC radio, "It's not being suspended for threee months, it's been removed by management."

"There is no reason for the strike to continue," added Vidalies, who had previously supported the development of Transavia.

Air France, however, denied Vidalies announcement, commenting that it would be "premature" to say the airline has abandoned the low-cost subsidiary.

"There is no change in the negotiations to suggest that this project has been withdrawn. The proposal on the table remains to freeze this project and to begin a wide dialogue with social partners between now and the end of the year, as management announced on Monday," an Air France spokesman said on Wednesday.

'Premature'

In a bid to halt a pilot strike which began on September 15, the French government urged Air France management and unions on Monday to clarify their positions and demands. As a "last" offer to break the deadlock, Air France management offered to put the Transavia project on hold until December. Unions, however, dismissed this as a "smoke screen."

"If the consultation does lead to anything...then the project will be pulled. But it is premature to announce today that the project has already been abandoned," Air France added on Wednesday.

Europe-wide strikes

According to Air France the strikes are costing the company 10 to 15 million euro ($13-19 million) a day, with the overall cost of the walkout estimated to be as high as 180 million euros by September 26.

Airlines across Europe are introducing money-saving measures in a bid to compete with budget airlines, including the transfer of some of their own operations to low-cost subsidiaries, such as the proposed Transavia Europe or Lufthansa's German Wings.

As Europe's leading airline attempt to offer lower prices, however, staff are being hit by repercussions including pay cuts and changes to pension plans. Air France pilots, who can earn up to 250,000 euros a year, fear they could be replaced by Transavia pilots, who are paid considerably less.

Similar strikes were called off by Lufthansa pilots in Frankfurt last Tuesday, after pilots planned to walk out for the fourth time in three weeks against new early retirement scheme proposed by the German airline. Reported progress in negotiations, however, was cited as the reason for cancelling the strike.

ksb/mz (Reuters, AFP)