Air France reabsorbs subsidiary Joon: an also-ran, failed experiment
From the start, Air France's subsidiary airline Joon was ill-conceived and half-hearted. The concept was originally intended as a long haul response to competition from Gulf airlines and announced by Air France-KLM's previous CEO in 2016 as part of his 'Trust Together' strategic project. Joon launched in Dec-2017, aimed at millennials and with the strapline 'also an airline'.
It always had compromise written right through it, particularly in its cost base, network focus, size and branding. From the outset, Air France did not attempt to make Joon a low cost airline, merely lower cost. Using the term (and concept of) low cost was offensive to Air France's unions, so much time and money that could have been used fighting external competition was wasted pandering to internal idiosyncrasies.
The long haul focus was diluted early on, so that Joon launched initially only on short/medium haul and that remains the majority of its network. It has only 16 aircraft (12 narrowbodies, four widebodies) and although its name, crew and onboard environment are new, its pilots, marketing and support functions are all provided by Air France.
The Jan-2019 announcement that Air France has "decided to launch a project studying the future of the Joon brand and the integration of Joon employees and aircraft into Air France" was tacked onto the end of a press release about a cabin crew pay agreement. Even Joon's demise seems half-hearted.
- Joon is small compared with Air France. Its network and fleet have a short/medium haul focus.
- Joon is not low cost, but lower cost than Air France and at a similar unit cost to KLM's.
- The Joon brand falls between two stools – aimed at millennials, but retaining strong links to Air France.
Joon is small compared with Air France
Under the fleet plan presented at the Air France-KLM investor day in May-2017, Joon was expected to have 21 aircraft in winter 2018/2019, rising to 28 by summer 2020 (10 widebodies and 18 narrowbodies). This projected total was an upper limit agreed with Air France pilot unions.
Even this modest fleet plan is not being fulfilled. Joon's current fleet of 16 aircraft at 15-Jan-2019 (source: CAPA Fleet Database) is smaller than originally envisaged at this stage of its development.
Joon offers 23 routes, all to/from Paris CDG, including six due to be added to its network in summer 2019. This represents 11% of the 206 routes for Air France in summer 2019 (based on OAG data for the week of 6-May-2019).
The majority of Joon's routes have been taken over from Air France, while some have been newly launched by Joon. Until the integration of Joon back into Air France is complete, these routes continue to be operated and sold under the Joon concept.
Taken over from Air France (14 routes)
Launched by Joon in May-2018 (3 routes)
To be taken over from Air France on 31-Mar-2019 (5 routes)
To be launched by Joon on 4-May-2019 (1 route)
Joon's network and fleet have a short/medium haul focus
Contrary to the original concept for Joon, its route network and fleet is dominated by short/medium haul routes and narrowbody aircraft.
On seven Joon routes from Paris CDG to European destinations Transavia France also operates from Paris Orly (including two routes due to be taken over by Joon from Air France this summer). This indirect competition has added to the brand confusion.
Joon is not low cost, but lower cost than Air France
The positioning of Joon was always planned to be a lower cost airline with fresh branding, rather than an out-and-out low cost airline.
Air France-KLM does not report separate financial or traffic results for Joon, but at the outset it said that Joon would aim for ex fuel unit cost 15% lower on medium haul and 18% lower on long haul versus Air France's existing operations.
Cost savings came from a new labour agreement for cabin crew, hired on terms more in line with market conditions, from lower catering and outstation costs and limited support costs, and more use of paid onboard product options. Joon pilots are on Air France contracts – a key obstacle to designating the airline as low cost.
By not attempting an out-and-out low cost airline Air France-KLM also recognised that even the new airline was too constrained by agreements with its pilots to create a sufficiently low cost base.
The Joon brand falls between two stools
The word 'Joon' has no specific meaning in any major language, although its similarity to the French word 'jeune', meaning 'young' is not a coincidence. As part of Joon's fresh approach, the cabin crew uniform consists of casual clothing and sneakers.
However, as with much of the Joon project, the brand concept was not sufficiently wholehearted. It ended up falling between two stools.
Joon is marketed by Air France, with its website part of the Air France website and clearly labelled 'Air France' above the Joon branding. In addition, Joon operates with the AF code, offers business class and premium economy, participates in the Flying Blue loyalty scheme and is supported by Air France's back office and ground operations.
In spite of this timid approach to breaking the mould, Joon's branding attracted criticism from traditionalists, particularly from some unions, who did not like the discarding of the core Air France brand in the name.
It added: "The plurality of brands in the marketplace has created much complexity and unfortunately weakened the power of the Air France brand".
Joon may have had some positive impact on Air France's cost base
In addition, Joon paved the way for lower cost cabin crew into the Air France organisation and this may have helped the parent to reach the agreement with its mainline cabin crew signed in Oct-2018 and concluded in Jan-2019.
In addition, Air France itself will now take delivery of the high density A350s that Joon was to have operated from 2019. It is to be hoped that the brief injection of a small amount of entrepreneurial spirit into the group may also be beneficial.
With Joon gone, Air France must cut costs and raise returns to KLM's levels
According to CAPA analysis, Air France's unit cost (cost per available seat kilometre, or CASK) is 25%-30% higher than those of other legacy European airlines of similar average trip length, including its sister airline KLM.
Ironically, the target CASK set by Air France-KLM for Joon is broadly similar to KLM's, according to CAPA estimates. KLM has consistently made better margins and a higher return on capital than Air France.
If the logic of profitability and return on capital were the sole determinant of resource allocation within the Air France-KLM group, undiluted by intra-group political considerations, one of two things would happen.
With Joon now on its way out, Mr Smith and Mme Rigail cannot escape this logic.