After the savings generated by the Transform 2015 plan, Air France now seeks to bounce back by finding new opportunities for growth. At Doha, aside to IATA’s general Assembly, Alexandre de Jugniac (Air France-KLM CEO) and Frédéric Gagey (Air France CEO) met with journalists and discussed over the future. And obviously, it will be painted with Transavia colours.
Low cost plan at the core of the revival
“There is definitely a potential for low costs”, cautiously admitted Frederic Gagey. “We can see it with Transavia. We increased our load factors by 30%, as well as the traffic and the revenue (…)”.
You needn’t be a genius to know that it would end up this way.
Can’t swim against the tide, goes the saying.
Air France – KLM, despite its best efforts, seems fated to switch to a more “low-cost” approach.
The idea may have its pros and cons, particularly among pilots and cabin crew, yet the French carrier has to run up that hill. Facing the reluctances of their employees, who do not seek to find themselves in the same situation than the likes of Ryanair or Norwegian, the CEOs must walk cautiously. How to effectively transform the holding without risking a social turmoil? This is Air France’s dilemma, and from what it looks, they are working hard to solve the issue.
To do so, they must address one of their ever-recurring issues: Air France has plenty of airlines and no one is sure of their exact role. Air France still does medium-haul, Transavia is a kind of LCC and Hop is… a value-cost airline, which isn’t exactly a very clear term.
According to reports, de Jugniac and Gagey shall aim to rationalise the activities of the three carriers and slash into redundancies. Way to go guys.
Outsourcing ground handling maintenance
Another way studied by the senior management to slash into costs would be to outsource ground handling maintenance. Currently, the maintenance is assured by Air France’s team for AF and Hop, whose employees are way above the market. Outsourcing the handling could result in a significant decrease. Still, La Tribune reports that Gagey thinks he can “handle” a transfer of the maintenance.
What he can’t handle however is the pilots’ reaction. The talks between unions and the C-suite were halted a couple months ago over the difficulties raised by the increasing transfer of routes to Transavia. The more aircrafts AF’s LCC flies, the more pilots are assigned to it. This is a cause of a serious fracture between the two, as the union fears that temporary affectation becomes permanent. Afraid that their living conditions may be altered, pilots could simply refuse the plan, like they have suggested in the past.
This is not a good idea. Time is running out for Air France, which is bleeding cash in medium-haul. Europe failed to address pilots’ social concerns and the difference of labour cost between an AF pilot and a “self-employed” pilot is way too important.
Now is not the time for the two camps to fight. In order to survive as a company, Air France’s only alternative is to march forward. Together.
Fabrice Gliszczynski from financial newspaper La Tribune gave a fairly good report(in French though) of this meeting that I suggest you to read now. This paper wouldn’t have been possible without him. Thanks Fabrice!