Air France's modest Boost looks pale against KLM's lower unit cost & better productivity
Air France remains the poor relation of the Air France-KLM Group. Although bigger than KLM, it has had a lower operating profit margin every year since the 2004 creation of the group. Crucially, and in spite of improvements, Air France continues to be burdened with lower labour productivity and higher unit costs than KLM and other peers. Moreover, its margin is one of the lowest for a European airline.
Air France's growth has been constrained by its poor financial performance, but this has also helped to ensure its survival. Even in a group where political considerations can influence strategic developments, the logic of committing resources where they generate the best returns has surfaced. KLM has outpaced Air France's growth both in capacity and in revenue – particularly in the past five years. It is increasingly difficult to envisage the group approving a meaningful return to growth for Air France without significant labour productivity improvements.
Against this background, plans for a new airline based in Paris with lower costs and higher labour productivity are vital to Air France. However, ambitions for the so-called Boost project are limited while Air France-KLM already has a lower cost airline with higher productivity.
It's called KLM.
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