FlyerTalk Forums - View Single Post - AdJ: "May have to cut more jobs", Bases de Province may close
Old May 6, 2013 | 11:00 pm
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Originally Posted by orbitmic
but one should always remember that there is a cost in ending an operation. Invariably, you anger people and that has a cost too including on the routes on which you want them to continue using you.
It is generally true that when terminating a product you upset the customers that have been using it and you risk that those customers boycott your other products. However, in the specific case of Air France's BdP routes I think that is not a problem.

The BdP routes were established to attract a customer segment in which AF previously was not attractive: customers that are looking for low fares on P2P routes from their departure airport outside of Paris. Most of these people did not fly AF before but were more of the Easyjet clientele. Now AF realises that it cannot make money with customers that want low fares on P2P routes and quits that market. So it basically leaves behind a customer base which it cannot make money with. That is a good decision.

Sureley, there were some passengers that previously used AF on more expensive transfer connections through Paris. But when they moved to the BdP routes AF actually lost money. The BdP was cannibalizing its more expensive connecting trafic through Paris. So again, it is a good decision to quit a product that merely cannibalizes your other more high yielding products.

Lastly, there are certainly some people (probably you are one of them) that use AF on all kinds of routes from/to/via Paris on higher fares and that also used the BdP routes from time to time. Surely they will be upset. But if someone like you was flying - I am making something up here - Venice to Abidjan via Paris on Air France in J, will you stop using that route only because Air France terminates Venice-Marseille? I doubt it. I don't believe that such a brand-punishment effect exists in this case because there is no advantage for people to give all their business to one airline. The only real advantage of bundling flights with one airline is to get more miles in a given FFP. So the effect would only exist if people needed to have both the "normal" (=Paris-centered) routes AND the BdP routes to collect enough miles to reach their mileage collection objective. But with the BdP routes giving only few miles anyway that effect is not very important. But other than that there is no spillover effect from terminating the BdP routes to using the hub routes.

All in all, leaving the low fare P2P market may be a good decision for AF. They simply cannot compete there as it seems. That market will be dominated by Easyjet.

Originally Posted by orbitmic
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And I would personally suspect that the MiNi/Classic distinction will disappear sooner than later. If I were to make a guess, it would be that it will all become MiNi in Y, will see the generalisation of NEO seating on flights under 2 or 2h30, and quite possibly the disappearance of PE or C or both on a number of routes where premium traffic is not here, entrenching the slow but sure conversion of AF into a low cost operation within Europe (France included). However, this is only a guess and a totally uninformed one at that.
On the one hand I wouldn't be surprised if the AdJ-run company came to the same conclusions as the PHG-run company: cheapen the European offering to be "competitive". And remember that in France "competitive" always means "having low costs" because the idea of being competitive thanks to better product quality does not exist (case in point: people in France point out how "uncompetitive" Germany is because the cost of labour in Germany isn't much lower than in France. True. But they don't see that it makes a difference whether one worker contributes to building a Renault which will generate 20 EUR of profit per car for its manufacturer or a worker with the same employment costs contributes to building a Porsche which will generate 16,000 EUR of profit per car for its manufacturer. You can have high labour cost if what you produce can be sold at a price sufficiently high to still generate a big margin).

But on the other hand I am still trying to make sense of how AdJ on the one hand says he wants to position AF higher than in the past (look at investments into J and P, lounges, no more new NEO planes) with a trend that you describe which would position the company lower. Not saying you are wrong, you may actually be right, but I just cannot put my head around all that strategic confusion.

Last edited by San Gottardo; May 7, 2013 at 12:34 am
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