Air France-KLM: why it must Transform, as medium haul and cargo operations hurt the bottom line

Air France-KLM has now reported a cumulative net loss of EUR3.8 billion since March 2008 and a loss of EUR439 million since the merger between Air France and KLM in 2004. Although operationally solid, with load factors reaching 83% in 2012, it remains financially the weakest of the big three European legacy flag carriers and at the wrong end of the scale when it comes to labour productivity. Its medium-haul passenger network and its cargo business are significant drains on its profitability.

Management has set in motion a number of initiatives to plug these drains and to improve productivity, including headcount reduction, the restructuring of its French regional bases, the reorganisation of Air France's regional airlines into Hop, an increase in capacity for its leisure brand Transavia, a reduction in freighter capacity and the development of its alliances and partnerships.