FLUG REVUE July 2002: Air France weathers downturn

AIR FRANCE WEATHERS CRISIS

By Sebastian Steinke

Étienne Rachou, Vice President Europe and North Africa at Air France (AF) is pleased: his airline survived the shake-up in the wake of 11 September relatively unscathed. As a classic European airline and national carrier of France, Air France is one of the big names in the industry, and in Charles de Gaulle airport, Paris, it has a powerful longhaul hub with 15,000 connecting flights per week that are also used by many German passengers. Air France offers a traditional three-class product and, along with British Airways, is one of the only two airlines to fly the supersonic Concorde.

Air France: Boeing 777

Boeing 777

Air France's summer schedule for 2002 is unchanged compared with the previous year in terms of seat kilometres. According to Rachou, the airline is profiting not only from the financially relatively stable French domestic market but also from the heavyweight "CDG” hub and a balanced global route network.

Unlike British Airways, for example, which with its heavy emphasis on North Atlantic services was particularly hard hit by the disproportional drop in demand in that segment, Air France succeeded in rapidly shifting the capacity that became free to alternative markets and to ultimately reverting to real growth. In the North Atlantic, Air France has reduced the volume of seat kilometres offered by a significant 13.8% in this year's summer schedule, retaining all its US destinations apart from Dallas. But at the same time it has expanded in Africa, a traditional, heavy-volume geographical area dating back to France's colonial days, by an impressive 68.8%. Admittedly it has profited here from the sad demise of its two rivals, Swissair and Sabena, both of which were African specialists. In the meantime, however, Swiss has resumed operations and claims to have also registered a gratifying level of bookings on its routes to African destinations.

Not only has Air France recently changed to a bigger aircraft on its African routes but Abidjan and Dakar are no longer serviced, respectively, by the A310 and A340 but by the 747. On top of this, Air France has increased the frequencies and replaced flights that used to have stopovers with new non-stop services. The change is particularly noticeable in western Africa, but in central Africa Kinshasa has been back on the schedule since January with two weekly A340 flights. And Johannesburg in South Africa has been serviced since January by the larger 747-400. Most striking of all, however, is the fact that half of the additional seat capacity offered on connections to western Africa (including flights to Niamey, Cotonou, Ouagadougou, Bamako, Conakry and Nouakchott) are being marketed in the lowest fare classes.

In the Middle East, also traditionally a strong market for Air France, the airline has had to cut seat capacity by 6.9%. The frequency of flights offered to Amman and Damascus has been reduced, while Beirut has gained one extra flight in the peak season.

In Asia, where growth stands at 0.5%, the situation has not changed much. However, as of 17 June the New York-Paris-Bombay route is now to be offered as a codeshare with SkyTeam partner Delta Air Lines. On 18 January Delta and AF were granted antitrust immunity by the US authorities and may now expand their joint offerings on American routes without any fear of accusations of monopolistic practices.

In the direction of the Caribbean and the Indian Ocean, Air France is now able at last to offer non-stop services to Santo Domingo and Saint Martin by using the 747-400 and A340. In the Air France network as a whole, non-stop flights now make up an impressive 93% of the airline's offerings this summer, making it the leading European airline, according to Air France.

Within Europe, on the other hand, passenger volume has declined slightly by 1.1%. However, in response to the bankruptcy of Swissair, AF has increased its capacity to Zurich and introduced an eleventh flight to Geneva. But the most significant change of all in Europe has definitely been the entry into the SkyTeam alliance of the financially ailing Alitalia, which gives the French better access to the large north Italian market, into which the Star Alliance has increasingly been making inroads. Between them, the two new partners already offer 82 flights per day between Italy and France as codeshare services.

In the German market, in which Air France enjoyed several decades of flying operations on behalf of the Allies, the airline ceased flying to Cologne last winter. Up to then, this destination had been served by its subsidiary Régional, flying the Saab 2000. But as eight daily connections continue to be offered to the nearby destination of Düsseldorf, Air France is hoping that the important market in the Rhine area will not weaken. One of the factors behind the decision is that Cologne is becoming steadily better connected by rail to Brussels and Paris thanks to the Thalys express train services. On the other hand, daily services to Hanover have been increased from four flights to six, and to Nuremberg from three to four. These services are also operated by Régional, using the 50-seat Embraer 145.

In the German capital of Berlin, Étienne Rachou was pleased to confirm that the proportion of business customers had risen significantly. For this reason, as Rachou announced at the International Tourism Fair in Berlin, a separate 52-seat lounge is to be opened for full fare paying passengers at the end of June. This will mark a significant boost to AF's long-established presence on the River Spree, which in Berlin once extended from Tempelhof to Tegel North and culminated in Euroberlin France, an Allied airline operated jointly with Lufthansa which was founded in 1988.

Air France's procurement policy has always been marked by the willingness to give technical innovations a try: from the Comet 1 to the Caravelle, from the Concorde to the A300, and from the A380 to the A318, the French have always been at the forefront whenever new aircraft types have been under development and on offer. Only recently they stubbornly insisted to Airbus that the A318's on order should be powered not by the specially developed PW6000 engines planned but by the CFM56 turbines used elsewhere in the A320 Airbus family, which are actually slightly too big. Today the manufacturer is probably grateful that they did insist on this, as delivery of the PW engines has been put back due to technical modifications and, thanks to Air France, a ready alternative is now available. On the other hand, the airline has not confined its purchases to Europe, and Boeing in particular has always enjoyed a loyal customer in Air France. The result of this uninhibited "mania” for collecting aircraft types has, however, been a relatively inhomogeneous fleet, which has almost certainly increased the cost of spare parts stockkeeping and employee training significantly. But then it does mean that the airline has an aircraft type that is the perfect match for each segment of the market and for each requirement profile.

With a change in direction of its fleet policy, Air France is now striving for increased standardisation. Étienne Rachou and Pierre Vellay, Vice President New Aircraft and Corporate Fleet Planning, took the occasion of the unveiling of the latest A330-200 in Paris to explain the new strategy. The plan is now to purchase more aircraft that are part of a family of modern, closely related aircraft, a strategy that Air France has already successfully exercised in the medium-range sector with the A318, A319, A320 and A321. Later this year the French are likely to place an order for around 40 regional jets.

In the longhaul area, they intend to concentrate more strongly on the A330/A340 family. 14 new A330-200's will take the place of the existing A310-200's and A310-300's by April 2004 and from the winter of 2002 they will also replace the Boeing 767. In addition Air France is ordering seven 777-200's, seven A319's and two new A321's. As well as nine A310's, two 747-200's and one 767 are to be taken out of service on longhaul routes. The French will also be taking delivery of a new Boeing 777-300ER in 2004, to be supplemented at the end of 2006 by the mighty A380-800 (the airline has placed ten firm orders with four options). At the same time Air France has also expressed interest in the 747-400XQLR, as a means of modernising the jumbo element of the fleet and also for deployment in the freight market, which this summer has seen an 8.5% increase in tonne-kilometres. Utilisation on passenger services even in the fourth quarter of 2001 was 1.8% up on the previous year. And in March it rose again by 2.7% to 81.2%. This should put Air France, which is expecting to make a profit for this year, firmly at the head of the classic European scheduled airlines.

From page 26 of FLUG REVUE 7/2002

Last updated 3 June 2002

FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany