Air France: the end of "all inclusive" economy class
Nov 2, 2009, 10:47 am
#61
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I also do not think they are that dumb.
But then, how do you explain the reason why they have chosen that strategy?
I have no clue.
I also do not think they are that dumb.
But then, how do you explain the reason why they have chosen that strategy?
I have no clue.
Nov 2, 2009, 10:54 am
#62
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I agree with all of you who point out to the difficulties in comparing the European, Asian, and North American markets (or Australian, South American, etc if you will), but fortunately, we don't really need to. The question is, within any one of these geographical areas of competition, can a major airline survive if it offers (1) significantly worse service than the competition with (2) equivalent or higher prices.
As pointed out by others, EVEN without free food and drink, etc, AF cannot be cheaper to run (and therefore offer lower fares) than BA or LX, let alone FR or U2 and it now wants to offer much less good service than these two, LH, AB and even (who thought this would ever be possible) AZ. We already mentioned examples such as SK and LX, but similarly, if I'm not mistaken, within the US context, the two airlines that had, at different times, lowered their service standards before other legacy carriers were TWA (which went bust) and US Airways (which survived but only under the chaperonning of UA). Not encouraging for good old AF and the brilliant ideas of the new management team...
As pointed out by others, EVEN without free food and drink, etc, AF cannot be cheaper to run (and therefore offer lower fares) than BA or LX, let alone FR or U2 and it now wants to offer much less good service than these two, LH, AB and even (who thought this would ever be possible) AZ. We already mentioned examples such as SK and LX, but similarly, if I'm not mistaken, within the US context, the two airlines that had, at different times, lowered their service standards before other legacy carriers were TWA (which went bust) and US Airways (which survived but only under the chaperonning of UA). Not encouraging for good old AF and the brilliant ideas of the new management team...
Nov 2, 2009, 11:53 am
#63
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Speaking from the Dutch side of the house, there has since the late eighties been an obsession with America and American management methods including trying to buy market share and volume in the American market. There is an implicit lack of trust in Holland or Europe or the Rhineland model being the answer to the future and a cynical capitulation believing that America, its worship of shareholder value and the radical American business models (no matter how flawed or customer unfriendly or employee hostile and no matter how dreary their dead ends) are the future and will be the future and thus must be emulated.
There was a great summary in the Volkskrant this weekend showing all the ambitious plans of Dutch multinationals during the 90s: the grab for market share and questionable mergers and acquisitions, the predictably hyped rise in share price and the inevitable crash and burn at the end. The marriage of KL with AF is one of the few less disastrous examples of an (reverse) acquisition -- partly because it was close to home and partly because the level of hubris was less and partly because the Dutch were not in charge.
AFKL(AZ) wants to be big. To be big one has to be a volume player. To be a volume player one must act like a volume player and compete with those having a simiilar volume model. The capitulation to the race to the bottom in emulating the American path forward is complete at AFKL. This race has been led by the KL side of the house, made possible by the simple fact of the real results they have built in turning KL into something between NW and Ryanair.
The customer travel experience, the service on board, the attention to details, none of that is seen as important. It is not important if your high volume/low price competitors are also not offering it. Even if they do and you are 50 euros cheaper, for substantial parts of the business and leisure market it doesn't matter anyway: whoever is cheapest wins and the passenger will just (have to) grin and bear it.
Could AF become a business one half or one quarter the size and focus a la Swiss on a more distinguishing market? Perhaps, but that is 180 degrees in the opposite direction of the strategy for the group. It is also contrary to the no-nonsense, value for money KL brand and it is unrealizable with the variable, hautain, no value for money product and service offering that so many passengers report as their experience on AF. The elephant in the room: Sooner or later both the labour issues in the ground and cabin and the lack of creative product development and merchandising flair and service culture will have to be addressed on the AF side of the house. Or, it will be an evolutionary model starting with eliminating customer value and gradually eliminating employee value.
ALDI and LIDL are examples of companies that took the low cost/low price leadership role in their market of food retailing. They single handedly were successful in destroying the remaining ability of most German consumers to be able to judge what good food (e.g. good bread) is -- and they are exporting their low quality/low price model around the world.
Once you have successfully eliminated all expectations except for a low cost, once you have trained your customers to have no expectations, how low you can go is only a matter of being willing to descend one more ring in Dantes Hell. AFKL are not defining the market, they are being re-defined by it.
There was a great summary in the Volkskrant this weekend showing all the ambitious plans of Dutch multinationals during the 90s: the grab for market share and questionable mergers and acquisitions, the predictably hyped rise in share price and the inevitable crash and burn at the end. The marriage of KL with AF is one of the few less disastrous examples of an (reverse) acquisition -- partly because it was close to home and partly because the level of hubris was less and partly because the Dutch were not in charge.
AFKL(AZ) wants to be big. To be big one has to be a volume player. To be a volume player one must act like a volume player and compete with those having a simiilar volume model. The capitulation to the race to the bottom in emulating the American path forward is complete at AFKL. This race has been led by the KL side of the house, made possible by the simple fact of the real results they have built in turning KL into something between NW and Ryanair.
The customer travel experience, the service on board, the attention to details, none of that is seen as important. It is not important if your high volume/low price competitors are also not offering it. Even if they do and you are 50 euros cheaper, for substantial parts of the business and leisure market it doesn't matter anyway: whoever is cheapest wins and the passenger will just (have to) grin and bear it.
Could AF become a business one half or one quarter the size and focus a la Swiss on a more distinguishing market? Perhaps, but that is 180 degrees in the opposite direction of the strategy for the group. It is also contrary to the no-nonsense, value for money KL brand and it is unrealizable with the variable, hautain, no value for money product and service offering that so many passengers report as their experience on AF. The elephant in the room: Sooner or later both the labour issues in the ground and cabin and the lack of creative product development and merchandising flair and service culture will have to be addressed on the AF side of the house. Or, it will be an evolutionary model starting with eliminating customer value and gradually eliminating employee value.
ALDI and LIDL are examples of companies that took the low cost/low price leadership role in their market of food retailing. They single handedly were successful in destroying the remaining ability of most German consumers to be able to judge what good food (e.g. good bread) is -- and they are exporting their low quality/low price model around the world.
Once you have successfully eliminated all expectations except for a low cost, once you have trained your customers to have no expectations, how low you can go is only a matter of being willing to descend one more ring in Dantes Hell. AFKL are not defining the market, they are being re-defined by it.
Nov 2, 2009, 12:40 pm
#64
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An interesting and philosophical post.
There is nothing wrong with a low cost model (Ryanair), as there is nothing wrong with a high service model (Singapore Airlines). You can be successful in either *IF* you manage to have a coherent positioning - either you are an "LCC" or a "high service" airline, even one that offers some less expensive tickets. By coherent I mean all elements of the product offering (hard and soft) fitting in and the operating model behind (including the cost aspect of things) supporting it. But AF's strategy of being a "full-service-in-premium-classes-except-that-full-has-been-reduced-to-virtually-non-existant-and-LCC-not-on-the-cost-but-on-the-revenue-model-side" carrier - besides regretting it from a customer point of view I doubt it from an entrepreneurial point of view.
They'll still have cost for lounges (even if most of them are mediocre), call centres (even if most of the agents are retarded and thus inexpensive morons), a workers council for employees' comfort but financed by the company, and so on - but they want to reduce their revenues from Eco pax. Which means that Business pax have to carry the entire cost burden. Which means that either Business fares go up even further or that their service will go down even further.
I'd be OK for AF to turn into a real LCC and act accordingly. Maybe that would open a window of opportunity for a French version of Virgin America for some routes.
There is nothing wrong with a low cost model (Ryanair), as there is nothing wrong with a high service model (Singapore Airlines). You can be successful in either *IF* you manage to have a coherent positioning - either you are an "LCC" or a "high service" airline, even one that offers some less expensive tickets. By coherent I mean all elements of the product offering (hard and soft) fitting in and the operating model behind (including the cost aspect of things) supporting it. But AF's strategy of being a "full-service-in-premium-classes-except-that-full-has-been-reduced-to-virtually-non-existant-and-LCC-not-on-the-cost-but-on-the-revenue-model-side" carrier - besides regretting it from a customer point of view I doubt it from an entrepreneurial point of view.
They'll still have cost for lounges (even if most of them are mediocre), call centres (even if most of the agents are retarded and thus inexpensive morons), a workers council for employees' comfort but financed by the company, and so on - but they want to reduce their revenues from Eco pax. Which means that Business pax have to carry the entire cost burden. Which means that either Business fares go up even further or that their service will go down even further.
I'd be OK for AF to turn into a real LCC and act accordingly. Maybe that would open a window of opportunity for a French version of Virgin America for some routes.
Nov 2, 2009, 7:20 pm
#65
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An interesting discussion indeed...
Just for comparison's sake, SU manages to offer proper 2 x 2 J seating and multi-course hot meals served by hand at your seat on all of their short- and medium haul network, be it SVO-LED or SVO-AGP (the latter being, I believe, one of the longest intra-European flights, only LIS-DME is longer). And they are not leaking money the way AF seems to be... On my last SVO-CDG flight on AF metal there was this Russian family across the aisle with a girl of about 12 and you should have heard her ask: "Mum, are you sure this is the business class section?" when they entered the plane...
As to how dumb the AF management can be - we're talking about the same bunch of people that basically killed their FF scheme in a heartbeat, right?
Just for comparison's sake, SU manages to offer proper 2 x 2 J seating and multi-course hot meals served by hand at your seat on all of their short- and medium haul network, be it SVO-LED or SVO-AGP (the latter being, I believe, one of the longest intra-European flights, only LIS-DME is longer). And they are not leaking money the way AF seems to be... On my last SVO-CDG flight on AF metal there was this Russian family across the aisle with a girl of about 12 and you should have heard her ask: "Mum, are you sure this is the business class section?" when they entered the plane...
As to how dumb the AF management can be - we're talking about the same bunch of people that basically killed their FF scheme in a heartbeat, right?
Nov 2, 2009, 7:31 pm
#66
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It gives me the chauvinistic satisfaction of loosening the association between the former national carrier and the country, so I guess it's a good news. Changing to AIRNIGERIA would have been better, though (no offense intended for our Nigerian readers)
1. If you follow the reactions of shareholders in the last quarter, they have been more sensitive, globally, to news of costcutting than to news of increased revenue. I guess they could applaud AF short term "plan".
2. I'd say the long-term shareholders care. LH share's worth 10,50 while topping under 21 in 2007. It lost less than half it's capitalization, while AF is now a little under 10,50 but it topped a little under 40 in 2007. Unless I missed some increase in the number of shares (which is quite possible), I'd say investors are realizing the situation.
1. If you follow the reactions of shareholders in the last quarter, they have been more sensitive, globally, to news of costcutting than to news of increased revenue. I guess they could applaud AF short term "plan".
2. I'd say the long-term shareholders care. LH share's worth 10,50 while topping under 21 in 2007. It lost less than half it's capitalization, while AF is now a little under 10,50 but it topped a little under 40 in 2007. Unless I missed some increase in the number of shares (which is quite possible), I'd say investors are realizing the situation.
There will be a bad awakening and we'll see too little too late ... aren't we all @ where the grass is greener already?
Nov 3, 2009, 6:04 am
#68
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Just received today the Senator kit from LH thanks to a status match presently offered to Hong Kong residents.
I have to say I have been impressed by the quality of the card (the latest FB Platinum are a joke) and of the baggage tags.
These are of course details, but LH present financial results seem to show that you don't need to reduce the service on everything to be successful, even if you are a legacy airline with certainly high costs.
I have to say I have been impressed by the quality of the card (the latest FB Platinum are a joke) and of the baggage tags.
These are of course details, but LH present financial results seem to show that you don't need to reduce the service on everything to be successful, even if you are a legacy airline with certainly high costs.
Nov 3, 2009, 6:12 am
#69
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Oh, you mean those two leather ones? Indeed nicer and not as cheapo as the one FB Platinum one you get as a top tier customer of AFKL.
But I must disappoint you: you can also buy those Senator baggage tags on ebay. They usually sell at around 20-30 EUR. As a reference: the Platinum baggage tags go out usually 2-4 EUR. Maybe even non-initiated buyers on ebay know that Platinum is worth nothing?
But I must disappoint you: you can also buy those Senator baggage tags on ebay. They usually sell at around 20-30 EUR. As a reference: the Platinum baggage tags go out usually 2-4 EUR. Maybe even non-initiated buyers on ebay know that Platinum is worth nothing?
Nov 3, 2009, 7:38 am
#70
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There is resale value to AF Plat tag? Maybe this should be mentionned in the FAQ, as one of the main strong points of AF's FFP?
Nov 3, 2009, 4:22 pm
#71
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But I will certainly use these tags, and they will certainly be more resistant than the all plastic FB ones, which break relatively quickly (generally before reaching the 10 flight mark).
Nov 3, 2009, 8:05 pm
#72
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Nov 3, 2009, 8:06 pm
#73
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Nov 4, 2009, 2:01 am
#74
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Nov 11, 2009, 3:50 am
#75
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I always considered a benefit for my company when I was travelling intra-EU flights with so called national carriers because of the timetables and services like biz check-in (because I do not have always a printer with me and I do not want to loose my time with that or having to check whatever) and lounges (guests and saving on meals).
Now most of these benefits are disappearing for me that I am a loyal customer.
This is the crisis...they have to change? Ok, so I will change.
In 2 weeks time I will have my first Easyjet flight for business: I will pay my speedy boarding, for my baggage AND for a decent meal (on-board) or in the airport.
I bet I will spend less than my usual carriers...and, for this time, I will have more.
Especially with ST I'm getting more and more disappoointed...with the only exception of OK (CSA). LH still offer decent food in Y and in the lounges: tell-me where it is possible to get the same with ST.
I just let you thinking that I am currently planning my next year's travels...and I am really wondering if to switch to *A definitely...or to have a mix also with OK (CSA) and Easyjet.
I travel mainly in Europe...