Transavia.com France

Air France-KLM: it may be unfair to compare its 1Q2013 with Lufthansa's, but…

Two of the European Big Three reported 1Q2013 results within two days, so we can’t resist a comparison. Air France-KLM’s quarterly operating loss of EUR530 million was EUR171 million below Lufthansa’s. Air France-KLM shaved net debt from EUR6.0 billion at the end of 2012 to EUR5.9 billion; Lufthansa’s net debt is less than one third of this. AF-KLM’s 1Q RASK grew by 1.2%; Lufthansa’s by 2.8%.

Air France-KLM makes losses in Europe, where Lufthansa now claims a profit. In an attempt to fix this, Air France-KLM has Transavia for some leisure routes, Hop for French regional point-to-point and some hub feed, Air France’s provincial bases strategy (under review) for non-hub French routes and both Air France and KLM for everything else. Lufthansa has Germanwings for non-hub routes and Lufthansa for hub feed in Germany.

For FY2013, Air France-KLM isn’t saying whether it can improve on 2012’s EUR300 million operating loss, only that it aims to cut unit costs (ex fuel and currency) and net debt, whereas Lufthansa aims to beat last year’s EUR524 million profit.

Volotea, Europe’s youngest LCC, sees more opportunities in France and plans a base in Bordeaux

Volotea is pursuing its strategy of linking Europe's small and mid-sized cities with direct air services and plans to establish a base at Bordeaux Airport and Palermo in summer 2013. Bordeaux will be the young LCC’s second base in France after Nantes Atlantique Airport. Air France has a market leading capacity share at both Nantes and Bordeaux Airport, but Volotea does not shy away from this formidable force. The young carrier will base two 125-seat Boeing 717s at Bordeaux and will offer 13 routes from the airport. With the Bordeaux base launch, Volotea will operate 45 routes from 14 French airports.

It is unlikely that Air France will sit back and hand over key routes to a much smaller competitor. The French airline is working on a major overhaul of its domestic and European operations, which should make it more fit and dynamic to halt the expansion of low-fare rivals in its market.

Air France rearranges the deckchairs as leading union calls for a 26-Oct-2012 strike

Even while Air France management was announcing a new management profile for the airline to implement the company’s “Transform 2015” restructuring programme, France’s most militant union, the General Confederation of Labour (CGT) called for a strike on 26-Oct-2012 to protest the programme itself.

On 15-Oct-2012, Air France Chairman and CEO, Alexandre de Juniac, presented to company managers a new organisation based around eight business units. These include long-haul; medium-haul at Paris-CDG; Paris-Orly and the regional airports; the French Regional Hub; Transavia France; cargo; industry operations; and Servair.




Transform 2015 is designed “to restore the Company’s competitiveness and place the customer at the heart of its strategy”, but it clearly has a long way to go to win the hearts of the country’s powerful unions. The CGT described the programme as an “unprecedented attack on our jobs, our wages and our working conditions.”

Transform seeks to reduce annual costs by EUR2 billion and to improve the airline’s woeful efficiency levels.

Air France-KLM sinks deeper into the red as it further revises capex and capacity

In spite of growing its passenger revenues nearly 7%, Air France-KLM Group saw its 2Q2012 net loss widen year-over-year as a result of provisions for restructuring and a drop in the value of fuel hedging contracts. The Franco-Dutch group recorded a deficit of EUR895 million for the three months ending 30-Jun-2012, more than quadruple of the EUR197 million net loss accrued in the year-ago period.

Air France-KLM took a special charge of EUR368 million related to its Transform 2015 restructuring programme, principally to fund a voluntary redundancy plan announced at Air France in Jun-2012. It also took a EUR372 million accounting charge related to the hedging of fuel prices. Excluding these non-cash items the Group’s net loss for 2Q2012 would be “by no means abnormal”, Air France-KLM Group CFO Philippe Calavia noted during a discussion of the company's results.

Ryanair’s latest fight over airport charges could lead to drop in traffic in Morocco

Europe’s largest no-frills carrier has unveiled plans to cut 34 weekly flights from its schedule to and from Morocco in a row over airport charges. The cut represents about 14% of its current capacity to/from Morocco and will result in Ryanair's capacity share in the Western Europe-Morocco market dropping 1 percentage point to about 16%. The new cut follows cuts implemented over the last nine months which have already reduced Ryanair’s share of capacity in the Western Europe-Morocco market by 4ppt from about 21% to 17%.

While relatively small in the broader Moroccan market, the new cuts are significant because Ryanair is the largest low-cost carrier in the country and is the second largest carrier in the key Morocco-Europe market. The dispute with Morocco’s state owned airports authority ONDA (Office National Des Aéroports) could potentially lead to further capacity cuts by Ryanair, leading to a potential drop in traffic at ONDA airports and impacting Morocco’s important tourism industry.

Transavia France is spreading its wings to regional airports in its home market

Air France has earmarked its Paris Orly Airport-based hybrid carrier Transavia.com to take a larger role in its short/medium-haul network, which necessitates a dramatic shake-up in order to safeguard the sustainability of parent company Air France-KLM. Transavia.com France will launch new routes from its home base at Orly and from three regional French airports – Nantes, Lille-Lesquin and Lyon – as it seeks to defend Air France’s dominant position in these airports against the increasing inroads of LCCs.

easyJet has a base at Paris Orly and at Lyon-Saint Exupéry Airport while Europe’s newest LCC, Volotea, opened a base at Nantes Atlantique Airport on 01-Jun-2012 and has announced route expansions from Lille. If Volotea follows up on its stated intentions, its network will inflate to 20 routes from Nantes and bring the capacity share of LCCs at the airport to over 40%.

Transavia France was founded in Nov-2006 as an offshoot of the Dutch charter/low-cost carrier Transavia Airlines, a wholly owned subsidiary of KLM, to re-enter the leisure market from France to countries in the Mediterranean basin.