nicolas75

Alexandre de Juniac unveiled last Friday the main axes of the transformation of Air France. The biggest project will address the short and medium haul, with the generalization of the provincial bases model and the increased use of the low cost subsidiary Transavia.

After saving measures beginning in January, here comes the substantive measures at Air France. After two months of internal work, which mobilized hundreds of managers, Alexandre de Juniac unveiled last Thursday to Unions and last Friday to senior executives of the group the main axes of the transformation of Air France, which will implemented next June. (...)

To restore its competitiveness, Air France will increase its productivity by 20% by the end of 2014, said Alexandre de Juniac. "It's not only how to return to profit in 2014, but to how find ways to develop new lines and regain our leadership," said the CEO of Air France (...).

If the unit revenue per available seat kilometer (RASK) at Air France is slightly better than the average of its competitors (6.9 cents against 6.6 cents), its costs are, themselves, very much higher: 7.8 cents per ASK against 6.4 cents for its competitors, according to figures from AT Kearney. A difference of 32%, representing a difference of 2.1 billion euros! It is therefore the money that Air France will have to generate, by cost savings and additional revenue, to make Air France competitive again. Wage freezes, reduced investment in fleet and other savings measures already announced in January should already represent 1 billion euros. Remains to find one billion more.

The biggest concern are the short and medium-haul flights of Air France and its regional subsidiaries, which generated over 500 million euros operating loss in 2011. With a flagship measure announced Friday: extending the province bases model to the entire ines that do not feed the long-haul flights from CDG. Like their colleagues in Marseille, the aircrew - pilots and flight attendants - must agree to fly 20% more, without money compensation. As for regional subsidiaries - Brit'Air and Regional Airlines and CityJet - they will be consolidated into a "regional hub". Details remain to be defined.

"But this is not enough," warned Alexandre de Juniac. To win back customers and benefit from the growth of this market, Air France will use the same weapons as low cost companies. Namely its low cost subsidiary Transavia, whose fleet and the network will be extended - in proportions yet to be decided - "under its current brand or another," said the CEO.

Same thing for the long haul network, whose profitability has fallen to "zero +" according to Alexandre de Juniac. An effort on the costs will be made, through the revision of wages company agreements. The creation of a long-haul low cost offer for touristic destination is possible, to take advantage of traffic growth in this segment. "Today, all our touristic lines are non profitable ones," said de Juniac.

The effort to win back customers will also be put on the business class. "Otherwise, we might lose market shares against our Asian competitors," stressed Alexandre de Juniac. For this, Air France is preparing to invest heavily, including a seat in business class, as well as the renovation of its lounges. What remains of its business class in the medium-haul flights will be improved also. But the CEO of Air France also stressed the mobilization of personnel, to provide better service, starting with punctuality.

All these projects and proposals are suspended for signature in June, with the new firm agreements with staff and personnel, as recalled by Alexander Juniac. "We cannot provide our shareholders with an investment plan if we do not make the necessary efforts," he said. The rapid implementation of these measures - no later than summer 2013- will also depend on the difficult issue of overstaffing. The measures seem to be accepted by unions, since the majority of unions, with the notable exception of the CGT, has already agreed to engage in negotiations on these issues, with the objective of reaching agreement before the summer.

Source: Les Echos (in French)

MELso

The announcement to the unions before senior executives is a bit of a worry, and hints at what the broader AF malaise is...

San Gottardo

When I read the article I thought exactly the same thing and decided to post that before even reading your post.

Having said that I have more hope in this CEO than in the previous one. His plan seems to make more sense and is very courageous.

If only he kicked out those NEO seats!

pansted00

Brace yourselves for many more strikes to come at AF as these measures , which all make good business sense , will never be accepted by the delusional , suicidal , over-privileged AF staffers.

JOUY31

Unless I am mistaken, the AF CEO was required by law to first announce the proposed changes to the CCE Comité Central d'Entreprise. This does not seem to be specific to Air France, but applies to all companies in France that are large enough to have a CE or a CCE.

jmbfrance

I concur. Not announcing first to the CCE would constitute the misdemeanor "Entrave au fonctionnement de Comité d'Entreprise", L.483-1.

San Gottardo

I know, I should have been more specific in my post. I was making my statement not out of surprise about this going on at AF but pointing out something that seems an oddity to anyone used to business environments that are about the prosperity and progress of firms, their shareholders and jobs at the firm and not about in the first place ensuring that nothing changes in the life of current employees. But we disgress, this isn't the topic here.

I also expect more strikes to come, which of course is making this entire transformation more difficult. Being under-capitalized (according to AF's auditor), going through a transformation, having a weak revenue basis and high costs is all just difficult enough to manage. Adding some strikes to it which will further undermine customer confidence and erode revenues isn't exactly helpful. Interesting times ahead.

stimpy

I'd rather see a bold strike (not a pun) from management even if there is a difficult period with the unions. It has to be done.

irishguy28

http://www.airfranceklm-finance.com/...%202015_VA.pdf

brunos

Indeed. And like Stimpy, I believe that the only way to achieve anything is a "bold strike". Unions have no motivation to yield knowing that they will get government support in case of prolonged strikes. But simply "negotiating" will get AF nowhere as unions will hardly yield anything of substance. How long will be the new CEO tenure? Maybe a bankruptcy is the only way forward?

orbitmic

• Win back customers
Air France’s customer focus has become insufficient.

I wish they would stop saying it and actually do something about it!! BTW generalisation of regional bases model to all point to point including ORY = end of C and generalisation of the NEO seat. I would personally expect it to also be generalised to 'some' markets from CDG (ie those with low premium loads like Scandinavia or Spain/Portugal) sooner rather than later...

pansted00

What the over-privileged AF staffers do not realize or are in denial of , is that it is a do or die situation for them at this stage.
The french taxpayers rescued them before, but France is friggin broke now , and even if whoever becomes the new president lied once again and said we will not let you down, the plain truth is that France does not have the first euro to do so, and the EU rules would simply forbid such a lifeline being thrown at them .
AF staffers : Sort out your own internal mess, get your act together, think outside the unionised box, benchmark wit the best out there , suffer for a few years, and I am sure you will make it through .
If you don't , so long mon ami .

NickoSnow

Fresh news from Le Figaro about Air France Social plan
Good luck Airfrance (and Transavia project)

"Un plan de départs volontaires chez Air France concernerait 5000 postes"
http://www.lefigaro.fr/flash-eco/201...000-postes.php

nicolas75

Translation:

Air France to implement a voluntary redundancy plan. The CEO, Alexandre de Juniac, is in a situation that could be compared to 1993.

Would the history of Air France be in the process of repeating itself? Almost twenty years ago, Christian Blanc, former president of the RATP, took the control of the state owned company on the brink of bankruptcy. Air France's debt reached 36 billion francs for a turnover of 57 billion francs and lost over 7 billion. "We're not far from what we lived in 1993, said Gilles Bordes-Pages, director of strategic relations at Air France and then pilot representative on the board. The difference is that state ownership was guilty of not having played its part. It injected 20 billion francs for the recapitalization. "The Blanc plan, submitted to a referendum, led to 5,000 job cuts.

On the program: increased work, wage cuts ... "In 1993, the company recover was easier, said Gilles Bordes-Pages, you could build on the techniques of "revenue management" implemented in the United States, establish a hub with a domestic network that supplied the long haul network... Air France did not face competition from low-cost carriers on short-and medium-haul and Asian companies and the Gulf over the long haul. This time, there is not such leverage. The only parameter which can be played today is cost. "

ixs

Air France denies all that... http://corporate.airfrance.com/en/pr...ransform-2015/

Sounds a bit weak...