Air France’s new regional strategy takes one step backwards as four new routes are pulled back


Air France has made a U-turn with one component of its turnaround strategy by cancelling plans to launch four new short-haul international routes from new bases in secondary French cities. The four routes were to be launched in early Apr-2012 under the "commercial offensive" portion of Air France's turnaround strategy, which is aimed at curbing the growth of budget carriers and French railways while also returning its regional operation to profitability. The decision to cancel the four routes before they launched will see Air France's "offensive" weaken, providing further opportunity for budget carriers such as easyJet to strengthen their operations in France.

Cancelling routes before they are launched is rather unusual, especially in the situation Air France finds itself in. France has a relatively low LCC penetration rate, at just over 20% currently. Low-cost carrier penetration in the French domestic market is particularly low, about 14%, while in the international market the LCC penetration rate is currently about 23%, according to Innovata data.

  • Air France cancels plans to launch four new short-haul international routes from secondary French cities, weakening its "commercial offensive" strategy.
  • France has a relatively low penetration rate of low-cost carriers (LCCs), presenting a significant untapped market for budget airlines.
  • Air France's regional strategy focuses on bases in Marseille, Toulouse, Nice, and Bordeaux, with Marseille being the most successful so far.
  • EasyJet is the main competitor to Air France in southern France, with bases in Nice and Toulouse.
  • LCCs are expanding their operations in southern France, posing a threat to Air France's market share.
  • Air France aims to reduce operational expenses by using A320s and local staff at its regional bases, while still offering traditional services.

As a result, it is clear that France is a huge market untapped by Europe's expanding LCCs. Air France's "commercial offensive" strategy is vital to the airline to ensure it maintains its market share in France, particularly in the southern part of the country, however, the airline now appears to be backing down somewhat.

Air France focusses on regional growth in southern France

Air France's regional strategy was originally announced in Oct-2011, focussing on the airline's operations in southern France. This saw the SkyTeam carrier immediately open a regional base in Marseille. Two more bases, Toulouse and Nice, are slated to open in Apr-2012 and finally a base in Bordeaux is planned for later in 2012. But Air France's new focus on these four bases is now set to reduce following its latest cutbacks, and potentially more reductions will follow.

Air France is currently undergoing a restructuring and changes in the south of France are a key part of its short and medium-haul restructuring plan. The carrier expects the new bases at Marseille, Toulouse and Nice to generate EUR950 million in sales by the end of 2012. It aims to breakeven on its new regional services by the end of 2013.

The cancelled services affect the yet to be opened Nice and Toulouse bases. Two routes from each have been cancelled - three times weekly services to Barcelona and Istanbul Ataturk from Nice, and five times weekly services to Brussels and Geneva from Toulouse.

Toulouse was in line to see 16 new Air France routes during Apr-2012, increasing total routes at Toulouse to 28. But this will now be 14 new routes following the recent cutbacks.

Nice was not to see such a large increase in services, with only six new routes, increasing total Air France services from Nice to 22. But there will now be only four new routes at Nice.

easyJet to be main beneficiary of Air France new route pullbacks

According to Innovata, all four routes will still be operated by other carriers despite Air France's decision to pull back. easyJet operates three of the four affected routes. Iberia, Spanish LCC Vueling, Turkish Airlines and Brussels Airlines each operate one of the affected routes.

City pair

Airlines operating as at 02-Apr-2012


Iberia / Vueling / easyJet


Turkish Airlines


Brussels Airlines / easyJet



Air France is already the largest carrier at both Nice and Toulouse. But easyJet is on Air France's heels and is the only other carrier with a significant operation at both French airports. easyJet now has small bases at Nice and Toulouse.

Nice Cote D'Azur Airport capacity by carriers (seats): 27-Feb-2012 to 04-Mar-2012

Toulouse Blagnac Airport capacity by carrier (seats): 27-Feb-2012 to 04-Mar-2012

In Oct-2011 easyJet started to turn up the heat on Air France in southern France with the announcement of plans to create two new French bases in Nice and Toulouse. The move included basing two A319 aircraft at each airport in order to strengthen its domestic French network and international network from the south of France.

easyJet stated at the time that it will focus its new Nice and Toulouse bases on routes with strong demand from business and short leisure break travellers. easyJet currently has three other French bases - Paris Orly, Paris Charles de Gaulle (CDG) and Lyon.

Air France faces growing low-cost threat in southern France

easyJet is not the only LCC expanding operations in southern France. New LCC start-up budget carrier Volotea recently stated Bordeaux will be among its first destinations when it launches services from Venice Marco Polo in April. Volotea plans to launch more services to France over the next several months.

See related article: European LCC start-up Volotea looks to stimulate demand in regional markets, starting with Venice

Ryanair is also increasing its operations in France, both domestically and internationally. Air France will see Ryanair begin to compete on the Bordeaux-Marseille route from late Mar-2012. Air France is currently the only carrier on this route.

While the overall LCC penetration rate in France is low, Nice and Toulouse buck the trend with higher penetration rates than the average for both international and domestic routes. LCCs now account for just over 30% of international capacity at both these airports, higher than the French international market LCC penetration average of 23%.

Domestically, Nice and Toulouse also both have an unusually high amount of LCC activity. Presently Nice and Toulouse both have 26% of available domestic capacity held by budget carriers. This is a substantial increase over the national average of 14%.

Air France is clearly feeling the pressure as LCCs continue to expand in southern France.

Traditionally Air France has carried passengers from these regional airports via Paris to other destinations in Europe but has seen declining passenger numbers due to the rising LCCs offering direct point-to-point services across Europe.

Air France's international network is still relatively safe from the LCC threat at its hub at Paris CDG, where LCCs now only account for about 9% of international capacity. Air France faces a slightly bigger LCC threat there domestically, with the budget carriers now accounting for 16% of domestic capacity at Paris CDG.

Air France makes preemptive move into Marseille

Air France first launched its "commercial offensive" in Marseille in Oct-2011 in a preemptive strike against the LCCs. Compared to Nice and Toulouse, Marseille's LCC penetration rates are still relatively in line with the country's average. Currently 28% of international capacity and 11% of domestic capacity at Marseille is held by LCCs.

Despite the recent new route reversals at Nice and Toulouse, Air France's Marseille base is proving successful so far. The carrier, at least for now, has kept intact plans to add five new services from the Marseille base in late Mar-2012 including Marrakech, Barcelona El Prat, Hamburg, Rome Fiumicino and Venice Marco Polo.

By increasing its Marseille operation rapidly, Air France will stand a better chance at remaining the dominant carrier at the airport despite the increasingly aggressive LCCs. Air France is by far the largest carrier at Marseille while Ryanair is the airport's second largest operator.

Marseille Airport capacity by carrier (seats): 27-Feb-2012 to 04-Mar-2012

Although it is stepping up competition against LCCs, Air France is not stripping down its product. The carrier will continue to offer traditional services from its new bases in southern France including free in-flight catering, newspapers, checked baggage, online check-in and pre-assigned seating.

But Air France has cut costs by using A320s at its new bases in southern France, which will be crewed by local staff working longer hours. This, paired with "rationalised and optimised" aircraft use, is expected to reduce operational expenses on its services from these regional airports by 15%. Fares are set at a base rate of EUR50 which given the full-service product should prove to be attractive to travellers from the regional centres, particularly corporate traffic.

Air France may reconsider Bordeaux strategy

With Air France leaving its "commercial offensive" move into Bordeaux until later in 2012, the recent cutbacks at Nice and Toulouse raise the possibility that a final decision on whether to open a base on Bordeaux may be left until the level of success at the first three airports is known. Bordeaux already has a high level of LCC competition compared to Nice and Toulouse. LCCs account for 49% of international capacity and 10% of domestic capacity at Bordeaux. No routes have yet been announced for Air France's planned Bordeaux base, so it remains to be seen how much of a move the carrier intends to make.

The growing LCC threat, combined with other issues regarding Air France's overall operation, mean the next few years are sure to be either make or break for Air France on the home front. Through improved crew and aircraft utilisation and retaining a premium short-haul product, Air France aims to reassert its dominance in the south of France.

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