Air France-KLM Group dreams of CDG airline boosting Air France; KLM again makes more profit in 2016

Premium Analysis

In 2016 Air France-KLM's long haul network generated more profit than the group as a whole. Yet the dependence of Air France-KLM's profits on the long haul business is under threat from more cost efficient competitors, in particular the Gulf based super connectors. Moreover, Air France-KLM's main European competitors IAG, and now Lufthansa, have developed a clear lead in developing commercial partnerships with Gulf airlines.

Air France-KLM's 2016 operating margin was its highest since before the global financial crisis, but remained below its pre crisis peaks and well below the rest of the world airline industry in what was almost certainly a new record year for global margins. Within the group, KLM's margin improved and was again higher than that of Air France, whose margin fell.

The planned new lower cost airline to be based at Paris CDG as a subsidiary of Air France, announced in outline in 2016 under the project name 'Boost', will now include medium haul in addition to long haul routes. This will be vital to setting it back on a path to sustainable profitability - if agreement can be reached with pilot unions to launch it. Even then, its scope and low cost ambitions will be limited.

Become a CAPA Member to access Analysis Reports

This CAPA Premium Analysis Report is 3,054 words.
Become a CAPA Member

Our Analysis Reports are only available to CAPA Members. CAPA Membership provides exclusive access to in-depth insights on the latest developments in the aviation and travel industry, developed by our team of dedicated analysts located in Europe, North America, Asia and Australia.

Each report offers a fresh perspective on the latest industry trends and is available online or via the CAPA mobile app, with customisable alerts to help you stay informed and identify new business opportunities.

CAPA Membership also provides access to our full suite of tools, including a tailored selection of more than 1,000 News Briefs every week and comprehensive data and analysis on thousands of companies around the world.