Story ID: GPairfrance11032016
Air France-KLM To Launch New Long-Haul Airline
By: Gregory Polek
Caption: Plan designed to fend off competition from Gulf state powers 
Word Count: 423
Air France-KLM on Thursday unveiled a new strategy to “regain the offensive” in long-haul markets centered on a new airline structured to compete with the three major Gulf State airlines. Dubbed Trust Together, the plan calls for the new airline to concentrate on “ultra-competitive” markets in which it would open new routes, reopen previously closed routes and maintain routes now under threat. The company does not plan to position the unit as a low-cost carrier, however, but rather as a “simple, modern and innovative offer” with standards comparable to those of Air France.

The company would also serve as a “laboratory” for Air France-KLM’s efforts toward digital and technology development, catering, cabin design, services, the so-called customer experience and work methods.

Plans call for the airline to operate 10 long-haul aircraft by 2020. Some 30 percent of the operations would involve new routes and employ Air France pilots on a volunteer basis “at work conditions adapted to its competitive positioning.” For cabin crew, the company would offer “an independent career path” but under work rules and compensation appropriate for what it calls market cost levels. Air France would handle ground operations, the cost basis of which the company said it expects to “optimize” through digitalization. It said negotiations with unions over the personnel resources of the new company will begin “in the coming weeks.”

Unfortunately for Air France-KLM, labor relations remain strained following a 2014 pilots’ strike that cost the company some €500 million. In one of its first moves to help restore goodwill between labor and management, the company announced it will replace Air France chief executive Frédéric Gagey with former Air France-KLM engineering and maintenance head Franck Terner and name Gagey finance director of the Air France-KLM group.

“Air France-KLM must pursue efforts to improve its competitiveness,” said the company in a written statement. “The unit cost reduction target for the 2017-2020 period is in excess of 1.5 percent per annum.” Other goals include registering revenues of €28 billion, carrying 100 million passengers and flying a fleet of 435 aircraft, excluding regional airplanes, by 2020.

Other aspects of the three-year plan include a reorganization of low-fare subsidiary Transavia to develop its European routes from Orly Airport and the provinces, as well as reinforce its position on certain routes to compete with the TGV high-speed train system and other European low-cost carriers. Meanwhile, as part of a plans to “rationalize” domestic services, only the Transavia and Hop! brand names will appear in point-to-point markets by next year.