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Air France to Open New Airline in 2017

The airline intends to operate their oldest Airbus A340s for this new operation

The airline intends to operate their oldest Airbus A340s for this new operation

The European carriers have been struggling to compete with the Middle East ‘Big 3’ – Emirates, Qatar and Etihad. The mainline carriers such as Air France, British Airways and Lufthansa are at an inherent disadvantage to compete with even the big Asian players in Cathay Pacific and Singapore Airlines with the former’s cost base being much higher despite the expenses incurred at home bases such as Hong Kong and Singapore.

The big European airlines have progressively scaled down their Asia services, with Air France even considering leaving Bangkok all together and leaving to their partner KLM – which thankfully was something that didn’t materialize.

But AF, along with BA and LH have all pulled out of secondary Asian cities such as Jakarta, Manila and Taipei – not due to a lack of demand, but due to the influx of seats that the Middle Eastern giants have brought into the market, driving prices down to an unsustainable level for the Euro carriers.

The Wall Street Journal notes as much:

Air France-KLM has lost ground over many years to budget carriers within Europe such as Ryanair Holdings PLC and easyJet PLC while it has faced rising competition from carriers such as Emirates Airline and Qatar Airways on long-haul routes in the relatively lucrative Asian market.

AF amongst others are being squeezed both ways within Europe and on the long haul market as well.

So to combat this it seems as though Air France has now confirmed that they will be opening a new airline with a much lower expenditure base than the existing AF cost structure but will still offer full service on these flights. The airline feels this would be the best way to compete in a market where they start already five paces behind.

To be completely honest, we’re not sure about this one but let’s delve into the details that we do know has been confirmed by Groupe Air France – and then you might see why we’re a bit skeptical.

Per the Wall Street Journal:

The new airline, set to start flying on routes to Asia in the winter 2017, would take over some of the least profitable Air France services and will operate them with staff on lower salaries, the company said on Thursday.

The new company would transfer Air France pilots, who would fly more hours for the same pay, and recruit new flight attendants with fewer benefits than Air France crew currently enjoy.

So…Air France pilots will fly more hours per month but be paid the same? Hmm. Then there’s the idea of recruiting new cabin crew but with fewer benefits and less pay than regular AF crew? We’re thinking this will look like crew bases in places like Bangkok ala Norwegian…and the strong crew unions at Air France will just take this no questions asked? Hmm.

Let’s not forget about the projected service aspect for these new operations:

Service would be less lavish than on board Air France planes, but won’t be as austere as on discount carriers, the company said.

Okay look. Air France economy class is pretty dismal, especially when compared to the rivals they are trying to usurp in the Middle East and Asia with this new airline. Charging the same for a perceived discount product to that of ‘luxury’ airlines from the East doesn’t seem like an idea that will bode well with most. While we feel as though AF’s La Premiere is indeed one of the best out there, L’Espace Affaires is a rather bog standard business class product – and given the nature of this venture Business is probably the best cabin you’ll get on this new airline. On their oldest Airbus aircraft, which most likely means their oldest premium product. 

And from beyond a passenger’s point of view, just how many brands can one airline with a strong brand identity operate without losing some integrity? Take a look at this:

The carrier, which operates the Hop and Transavia brands within Europe in addition to Air France and KLM, has undertaken several restructuring programs to improve efficiency and cut costs without narrowing the gap in competitiveness with its most important European rivals.

People are already confused on what exactly the AF-KLM group is with so many subsidiaries, regional airlines, different products and different types of crew and service offered on a given flight. Confusion is basically the bane of existence of any competent marketer – so adding to this branding mess will surely have the AF marketing team pulling their hair out.

To top it all off they will be using their four oldest A340s on these routes, configured surely to cram as many revenue paying passengers in as possible. Not to mention they’d have to compensate for the old fuel inefficient 4 engine A340 with pricing which won’t bode well. I’m not even going to start on what might be offered on these cattle express aircraft – we’re thinking keeping the 10+ year old Biz product on these aircraft but taking out premium seats and then cramming in more in Economy:

The airline would include four-engined Airbus A340 planes among its fleet even though the aircraft has fallen out of favor with other carriers preferring more fuel-efficient two-engined planes like Airbus Group’s own A350 or Boeing Co.’s 777 and 787 jetliners.AirAsia X, the Asian low-cost long-haul carrier ran discount flights to London using the A340, but scrapped them because the plane wasn’t economical.

Ah and the last paragraph of the release:

Air France management is counting on the new airline to help it increase the number of passengers it flies to 100 million a year by 2020 from around 91 million today, to generate revenue of 28 billion euros ($31.14 billion), up from €26.1 billion in 2015.

So…more seats, more revenue, less service. Ah okay Air France – we get it.

No word yet on what implications this new airline has on mileage benefits to AF’s existing FlyingBlue program and its relation to the larger SkyTeam alliance.

Thus far, were not so sure (read: skeptical) with what we’ve read and heard. Long haul low cost has been a very challenging operation to make work, let alone with a super labor entrenched airline like Air France. In fact, we’d go as far to say we might avoid AF for a bit as labor issues will surely follow given this new offshoot of Air France operations.

The frequent flier mileage accrual perspective would be the ultimate deal breaker for us – details haven’t been released yet but given the rather bizarre set up of all this, we wouldn’t be surprised by either a convoluted earning structure or a completely different (i.e. useless) program all together.

Not to be a Debbie Downers here, but we’re really not sure on this latest move from Air France. Are you more optimistic? If so, what makes you feel so?  

 

 

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