Janaillac had the support of Bruno Le Maire, France's economy minister who supports Air France management.
Jean-Marc Janaillac, CEO of Air France-KLM Group, attends a news conference in Paris on May 4, 2018.
Air France had offered workers a salary increase of 2 percent in 2018 and a further 5 percent over the following three years, but French unions, which have demanded 5.1 percent this year, have complained management is not serious about talks.
"Air France-KLM is now without a boss and will find it hugely hard to attract a high-level manager", analysts at French brokerage Aurel-BGC said.
Pressure on Air France-KLM AIRF.PA grew on Monday as its shares fell by more than 10 percent after chief executive Jean-Marc Janaillac said he would resign over the rejection of a pay deal by the airline's staff.
Air France reported Friday that it lost $320 million in the first quarter of 2018, adding that the strike will lead to at least $330 million more in lost revenue through the end of the year.
However, pilots, cabin crew and ground staff were on strike for a fourteenth day since February on Monday and Air France said one in five flights would be canceled on Tuesday. Janaillac's resignation launched the decline of the stock.
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"Those who think that, whatever happens, the state will come to the rescue of Air France and mop up the losses of Air France are wrong", said Mr Le Maire.
Despite the strike, the airline insisted that it would be able to maintain 99% of long-haul flights on Monday, 80% of medium-haul services and 87% of short-haul flights.
"I will not explain to the French that we will.absorb the losses of Air France while Air France does not make the necessary competitive efforts to be at the same level as its major European competitor". Strikes have already cost the company €300 million.
"The survival of Air France is in the balance", he said, adding that the state would not serve as a backstop for the airline's debts.
The government of French president Emmanuel Macron is involved in its own ongoing battle with broad swaths of society which are resisting economic reforms.
The offer would have raised wages by 7 percent over four years.