Air France Plans No-Frills Airline to Serve Asia, U.S.
November 03 2016 - 6:10AM
Dow Jones News
PARIS—Franco-Dutch airline operator Air France-KLM plans a new
medium-haul and long-haul budget airline that could tap the
lucrative market serving cities in the U.S. and Asia to recapture
market share lost to expanding low-cost rivals and Middle Eastern
carriers.
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. Service would
be less lavish than on board Air France planes, but won't be as
austere as on discount carriers, the company said.
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.
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.
That competition continues to grow in new areas. Discount
airlines such as Norwegian Air Shuttle ASA are operating cheap
flights to North America from Europe, including France from this
year.
Europe's established carriers, as they did when the threat of
lower-cost budget airlines emerged within Europe, have taken time
to react to the risk of losing market share on long-haul routes.
Air France is following the lead of Deutsche Lufthansa AG which set
up a discount long-haul business within its low-fare Eurowings
unit.
Air France-KLM said the new airline would focus on flights to
Asia though could later fly planes across the Atlantic.
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.
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.
Write to Inti Landauro at inti.landauro@wsj.com
(END) Dow Jones Newswires
November 03, 2016 05:55 ET (09:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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