Air France in full flutter in a sky ultra-competitive

The CEO of Air France-KLM Jean-Marc Janaillac, at Paris on may 4, 2018 (Photo by GEOFFROY VAN DER HASSELT. AFP)

The resignation of the CEO of Air France-KLM (PA:AIRF) Jean-Marc Janaillac opens a period of uncertainty for the group, in a european sky that is highly competitive where the slightest weakness could cost market share.

“If she wants to last, this company must be competitive, it is necessary that it adapts its format,(…) now we start again from zero, he will have to find a solution”, underlined the secretary of State of the digital Mounir Mahjoubi Saturday on France Info.

“This is a tsunami for Air France, it is a disaster for this company to arrive at this point of deadlock,” said Marc Rochet, old road air transport officer of Air Caribbean and the French Bee.

55% of wage earners against the wage agreement proposed by the management, with the participation of 80% of the staff: the consultation has turned to a repudiation of the CEO, who had put his mandate in the balance. And strengthened, on the contrary, the position of trade unions.

Arrived at the head of the group in 2016, Mr. Janaillac was given a mission to fight the fierce competition of the companies of the Gulf and low-cost.

Air France must also take head to the two european heavyweights IAG (LON:ICAG) – home-mother of Spanish companies Iberia and Vueling, british Airways and irish Aer Lingus and germany’s Lufthansa (DE:LHAG).

“Here, the giant is in a situation of weakness and the other will accelerate, it is clear,” commented Alain Battisti, president of the Federation nationale de l’aviation marchande (FNAM), which represents more than 95% of the fleet and of the activities of the French air transport.

For the past ten years, 90% of the growth in the number of passengers transported has been captured by foreign actors, while the market share of French companies decreases by one point per year for the past 20 years, according to the organization.

– “Competition tougher” –

If the history of Air France is that of a succession of crises and strikes, the situation today is no longer the same.

“The competition is much more severe, Air France has no control over its market as it did 10 years ago,” says Battisti. “There are competitors that are more powerful, more agile, and as France is the second market (…) of Europe, there is bound to be coveted”, he adds.

For observers, the French pavilion is in need of a new development plan to get out of her situation of vulnerability.

Air France, which posted an operating loss of 178 million euros in the first quarter, “will be in an extremely critical situation as soon as there will be an increase in fuel prices or a decline in the volume of passengers,” said an expert on condition of anonymity.

“This is the time to rebuild a new business plan with two components, a component of traffic development and a component for optimizing performance”, he adds.

The cost of kerosene weighs between 15 to 35% of the cost price of a complete flight – the airlines.

The risk, according to Mr. Rochet is that of a “gradual decline”. And to quote the company Alitalia, placed under guardianship in may 2017, after the rejection by the employees of a restructuring plan.

The immediate future, “it is not just the replacement of a man, but it is a new vision,” and the question of the “retreat of the State” (the shareholder to the tune of 14.3%) to allow “everyone to be in the face of something that is not a kind of protection or immunity superior and to engage in the future,” he adds.

Friday night, the government has called “the sense of responsibility of each,” according to a joint statement from the Economy minister, Bruno Le Maire, and the minister of Transport, Elizabeth Terminal.

“The group has strong assets but also many challenges,” they warned.

The president of the SNPL, the main pilots union of Air France, Philippe Evain, for its part, stressed Friday evening that the inter-union strike had not requested the departure of Mr. Janaillac.

“We think he should reconsider the question, to appease the company, to make a gesture to the employees likely to deliver all the work,” he said.

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