Wednesday, November 2, 2016

AIR FRANCE-KLM Duplan in the wing – Release

Named there are less than four months, the CEO of Air France – KLM, Jean-Marc Janaillac has entered into the heart of the matter. The new boss of the company unveiled, for several hours on Wednesday, its strategic plan for the next three years. Called “Trust Together” (“believe”), this new plan aims to revive the carrier, weakened by social unrest and his stall in the face of competition.

The board of directors on Wednesday, Franck Terner has been appointed number 2 of the group in replacement of Frédéric Gagey (read above). In the wake of this meeting, during the committee business scheduled for this Thursday, one of the main announcements was to be the creation of a new brand for rates, ultra tight, specializing in long distance flights. It should be ready to take off in 2018 and count a dozen airplanes. After much hesitation on this project and found that Air France-KLM had missed the shift to low-cost carriers in Europe fifteen years ago, Janaillac does not want to take more of a delay on this new emerging market. Already, companies such as Norwegian Airways, or French Blue (read Release of 14 October) offer flights to the Caribbean, or the United States at less than 500 euros round-trip. For Air France-KLM, this new low-cost brand on long distance flights would resume lines such as Paris-Kuala Lumpur (Malaysia) or Paris-Brasília, closed for la ck of profitability. It would also keep the links that don’t earn money. Including destinations in asia, rivaled by the companies in the Gulf such as Emirates.


The project is nevertheless at high risk for Air France, who will face two pitfalls. First, it is not to cannibalize the parent. The company already has a subsidiary low-cost carriers on flights of less than four hours : Transavia, which took off from Orly, and a few cities in the region. This company can nevertheless be a source of confusion for customers. Thus, a Paris-Barcelona round-trip amounts to 125 euros on Transavia… against 374 on Air France. Difficult in these conditions to avoid a transfer of customer base and loss of revenue, since the rates are lower. Then, this new company will have to be accepted by the trade unions. The drivers will certainly be all from Air France, but their conditions of remuneration for this subsidiary could give rise to serious tussles.

on The employees ‘ side on the ground and responsible for the maintenance and supply of these flights, the distrust is great. They fear a recourse to outsourcing, whose costs are lower. “It could be, for example, an agent of Air France under the plane, along with other employees from companies sub-contractors”, is wary of a union representative. The discussions did not announce the most quiet. “The immaturity of social dialogue in the company leads relentlessly to the same cycle. In the phases of voltage, drivers prevail, before the report of force does not result in the departure of people who have done the job and the arrival of a new management team”, is concerned that a member of the board of directors not very optimistic about the future of the company.


The other issue at stake in the plan “Trust Together” is to continue the savings started to all floors. If the method is different from what has been undertaken in the past, the goal remains : to reduce the gap of competitiveness between Air France and its competitors. “Jean-Marc Janaillac will be three or four months to convince him by pulling off some savings to the different categories of personnel”, prevents Yan Derocles, analyst at Oddo Securities. After years of losses, the net income of 118 million euros in 2015 is largely due to the decline in the price of a barrel of oil. If the price of a litre of kerosene is rising again, the results could fall back into the red. All the more since this summer, the France seduces much less tourists (read Release of October 31). The flights from Asia and the american continent would have a fill rate decrease of 15 %.

The situation is even more complex to manage and that the company is made up of two entities : Air France and Dutch carrier KLM. However, in Amsterdam, it is considered, with a hint of annoyance, that the troubles and the absence of reforms to come, especially on the French side. Quite a rare occurrence, the main pilots union the netherlands has condemned the latest strike on his French colleagues. Since then, Jean-Marc Janaillac has attempted to enter the board of directors of KLM, the history of putting oil in the wheels. He is met with a refusal as polite as farm, indicative of the atmosphere between Paris and Amsterdam.

A measure of the plan “Trust Together”, however, should do consensus. The announcement of a call for bids and a budget of $ 20 million for the creation of new uniforms for hostesses and stewards. Those of today are from 2005. The time change at Air France : last year, the human resources director was tearing his shirt in front of the cameras ; this year, the CEO announces that he is going to carve out new suits.

Alain Franck


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