Air France-KLM's new plan to grow LCC Transavia has taken too long; a union confrontation looms

At its recent Investor Day, Air France-KLM gave details of its 'Perform 2020' five-year industrial plan, originally outlined in Jul-2014. Much of it is a continuation of 'Transform 2015': discipline over capacity and capital, further unit cost reduction (at 1% to 1.5% pa) and further balance sheet fixing. It also involves more restructuring of the short and medium haul passenger business, including a more aggressive expansion of LCC Transavia from 44 aircraft this summer to 100 in 2017, a further cuts in the full freighter fleet and growth in the more profitable maintenance business.

Perform 2020 moves Air France-KLM in the right direction, but the pace of change is glacial. The group's profitability lags its main rivals' as it continues to be hamstrung by legacy issues such as union power. Transavia is a genuine low-cost operator, but, since its French arm started in 2007, its total fleet has grown by 16 aircraft, close to 60%. Over the same period, the combined fleets of Ryanair, easyJet and Norwegian have more than doubled, adding over 300 units. It has taken Air France-KLM far too long to wake up to its LCC's potential.