Air France To Trim Domestic Network To Stem Losses

 - May 13, 2019, 2:04 PM

Air France will reduce capacity on domestic routes by 15 percent by the end of 2021 in an effort to cut losses, which amounted to €189 million ($212 million) last year—a sharp deterioration on the €96 million loss sustained on its domestic services in 2017.

The decision has triggered a voluntary redundancy plan for 465 staff at a works council meeting May 13, marking Ben Smith’s first employee reduction initiative since he became CEO of Air France-KLM Group in September last year. Air France employs some 3,400 people on its domestic operations across 13 bases. The voluntary departures, to be carried out over a one-year period, concern only ground staff.

Air France CEO Anne Rigail emphasized the company’s ongoing recruitment drive, which she said will see “many new talented staff—pilots, flight attendants, mechanics, and engineers"—join the airline in 2019 to support the airline's growth. However, she also stressed the need for a rational approach. “We also have the responsibility to guarantee an even balance of our activities in certain sectors to secure their long-term viability,” she said. "This is the idea behind the project presented for the short-haul sector today.”

The airline will reduce domestic available seat kilometers through a combination of measures, including suspending routes, reducing frequency, and deploying aircraft with less seat capacity, an Air France spokesman told AIN. He declined to specify which routes the airline would cut but said the changes would occur on routes most affected by competition from high-speed trains (HSTs) and low-cost carriers (LCCs). Air France deploys Airbus A320s on its short-haul routes, including 18 A318s and 33 A319s. Shifting some routes to Air France’s in-house LCC, Transavia, can’t happen for the moment as the growth of Transavia France remains capped at 40 Boeing 737-800s under an agreement with pilots. Transavia France will operate 40 aircraft on its own network this summer.

Air France blamed the increased and unfair competition of the French HSTs and foreign LCCs for the mounting losses on its domestic network. “[They] have gained ground rapidly with aggressive pricing policies and often with the help of public authorities,” it said. Spanish LCC Volotea operates five bases in France and earlier this month claimed it stood as the second-ranked airline in France in terms of domestic capacity. Ryanair in April reopened a base at Marseille Airport and launched a base at Bordeaux, each with two Boeing 737-800s, and will open a base in Toulouse this fall. The majority of the Irish LCC’s network involves international services and includes only a couple of French domestic routes. UK LCC EasyJet last month opened a seventh base in France, at Nantes Airport.

The HSTs, Air France noted, have increased their capacity throughout the country, reduced journey times, and developed a very competitive low-cost offer. “The French authorities have ensured that train travel has expanded over the years and has become Air France's main rival on the domestic network, departing from Paris airports or the French regions, without being subject to taxes or charges that directly target air transport,” it said. On routes where high-speed trains connect Paris to the provinces in less than two hours, Air France has lost 90 percent of its market share, the airline added.

Since 2013, cumulative losses on Air France’s domestic operations totaled €717 million, the company revealed. Commercial initiatives to meet customer expectations in terms of flight schedules, customer experience, and punctuality have allowed it to maintain a 65 percent market share in the domestic market, Air France said. However, “on some routes, the revenue decline could not have been prevented, nor unit costs reduced,” it concluded.