brunos

Indeed, not completely off at all.

But there are many aspects to be considered, cash and accounting wise. Let's forget about accounting and window dressing for a moment.

Throughout the world, many had the idea to start a new airline with limited out-of-pocket expenses by buying cheap old aircraft. The problem with ac is that the technology has evolved quickly and so have their operational costs. By old, I mean ac that have much higher operational costs (say 50% higher). In today's competitive environment, a LCC running huge operational costs is doomed from the start, due to huge cash losses on its operational margin.

To be profitable, the airline will need a huge out-of-pocket investment in efficient planes and hope that operational margin will cover those investment costs (like Easyjet or AirAsia).

PS1: The issue on how you finance the investment in new planes (capital, debt, lease) is a separate issue
PS2: Many airlines replace not-so-old ac by new much-more-efficient one to reduce operational costs. AF has been very slow doing it and pays the price.
PS3: Experts usually consider that old inefficient ac have a negative present value, not a zero one. But there is a long waiting list for fuel-efficient ac and there might be accounting and political reasons to keep them. But that's getting very complicated.

Sjondorn

IMO the A340 is just an accounting thing. AirFrance-KLM doesn't necessarily care if they cost them extra money on any of their airlines, so since they are old planes, it makes more sense to me that they'll put them on their low cost brand and then account with that when setting their business target.

brunos

I fully agree with everyone that it is an easy solution for AF to quickly start an airline with the "transfer" of some of its existing frames, at least in the short run. Transferring A340 means no expensive investments for cash-strapped AF. Furthermore, it allows a "cheap" trial period given all the uncertainties surrounding the project, which might or not ever materialize.

All I was trying to say is that the A340 is hugely expensive to operate and that means that Boost starts with a huge handicap for a supposedly "lower" cost airline.

NickB

Yes, I was thinking that too. Plainly, the operation would not be viable with sticking to A340s long-term but it might make sense in the short term.

Well, it is a handicap only at the point at which the extra operating costs exceed the cost of financing the acquisition of a new plane (whichever way the new plane is acquired). That said, it is indeed possible that this may be that this point may be reached very early (and I take your earlier post as suggesting that this might in fact be the case).

orbitmic

Guys, with respect, I think your rational and intelligent arguments are missing the Boost (and other AF subsidiaries) ethos: AF look at planes just like they look at routes: 'the new airline will take over those operations which AF don't want to keep because they do not manage to make a profit on them'. They don't give a sh*t whether it's good or bad for the new airline. It's just there and AF don't need them so that will have to make do. AF were not too keen on getting A350s either thankfully but if they change their minds when they realise what a great plane it is Boost will just get something else instead.

In the eyes of AF management and unions alike, Boost is a glorified rubbish bin and they expect it to transform potato peels into gold because they say so. I think Boost should consider itself lucky AF did not have a few 1980s Antonov they wanted to get rid of!!!