orbitmic

Even though I do not agree with you on that, there is a logic in your argument that I can still perfectly accept (and which was indeed AF's until a few months ago). However, I do think it is incompatible with the myth of AF claiming 'we are now competitive against low cost carriers'.

FranckM

And also the argument that they based all this MiNi fare because of the result of marketing study that showed price is #1 consideration for the pax when they have to get a ticket.

San Gottardo

This thread was started tree months and 5 days ago. At the time a handful of people lauded this as being great for AF which now finally had an offer in the market to credibly play in the LCC price segment and great for passengers who could now benefit from Air France superior-to-LCC service whilst having the same fare advantages as on LCCs.

Now that it turns out that one of the main benefits of LCC fares - namely oneway fares - are not offered by AF Mini those same people say that this is good because oneway travel necessarily stands for "flexibility" and therefore warrants a higher fare.

If that also is the philosphy of yield management at AF then we have the prove that AF doesn't think like an LCC (whilst offering many servies on LCC level or not offering them all) and will not be a huge threat to the LCCs.

Easyjet, don't worry...

orbitmic

+1. I think those four simple words are a good summary...

JOUY31

Well, Easyjet is not Air France's main low cost competitor on short-haul routes ...

San Gottardo

One more reason why they don't need to worry, then

Seriously: my head starts getting dizzy from all this marketing spin. First we are being told that Mini is great because AF can compete with LCCs and the train. OK. So Air France targets customers that would otherwise take LCCs and the train.

When it then turns out that AF cannot compete with LCCs on oneway fares we are told that this is by design because oneway fares are more flexible (sic) and therefore must be more expensive and therefore passengers using easyjet instead aren't really that much of a loss. OK. So Air France target customers that would otherwise LCCs and the train, except for those that want one way trips.

Once that established we are being told that in any case easyjet isn't Air France's main low cost competitor on short haul routes. Personally I am surprised, my thinking was that easyjet with its product to fly from main airports and offering a number of amenities (at an extra price) and around 8 daily departures from Paris to places like TLS and NCE was a major competitor. But they're not - but then who is? Ryanair? Even I buy the argument that one pays more to fly AF and to avoid what resembles cattle transport rather than air travel. Or the train? But even Ryanair and the train have oneway fares!

So I am beginning to ask myself: if Air France doesn't want to capture passengers with more attractive fares, if easyjet in any case isn't a competitor - what market share does Air France try to win back? And if all that competition doesn't exist, then why bother to offer Mini fares?

Either I have a serious mistake in my line of reasoning (then please tell me) or there is a lot of excusing away going on.

JOUY31

Well, as I do not work in the travel industry, obviously the views I express are mine and do not represent any operator's, so my analysis may not accurately reflect their policy and strategy, including AF's, and may be downright flawed.

Having said that, Air France does not ambition, IMHO, to become a pure LCC player, nor a pure leisure travel operator, nor a niche player like Virgin, so it strives to address the needs of its various customer segments. So it won't be as cheap as LCCs, but may be close enough (customers have all the tools to collect the information and make their own decision), while offering services that point to point carriers do not offer. It will have to balance the need to improve the offer to its Abonné customers while at the same time luring back customers attracted to cheaper fares on the TGV or sometimes on LCCs (the two main routes out of Paris where Easyjet competes with AF are TLS & NCE; no BOD, no MRS where the TGV and AF compete head to head).

So it is a balancing act that will not attract people who want the lowest fares or the lowest one-way fares. So what, Ryanair's customers are not exactly the same as Easyjet's customers and probably not exactly the same as Air France's MiNi customers travelling on return fares. Nor will this balancing act satisfy some of my management mentors who love companies that focus on a core business or who are pure niche players. But it will build on one of AF's strength, which is being a network carrier, with a wider and more diverse network than LCCs, slightly more integrated than LH/GermanWings. One of its weaknesses is that it will never have the best USP, nor be the cheapest offer, but that's a strategic decision.

As to AF's major low cost competitor on short-haul routes, it is IMO the TGV. It is killing off most routes around 3hours' travel time. Easyjet did not kill the CDG-SXB route, nor does it try to compete on Paris-Marseille. It is also true that the TGV offers one-way fares, but it usually does not offer cheap one-way fares. AF's and the TGV have a very similar approach on this. The policy I personally dislike on one-way fares is BA's intra-Europe: offering cheap one-way fares in Economy, but not in Business Class, which means greater flexibility to the customer travelling on the cheapest fares.

On a more personal note, when participating in these lively discussions, I strive, sometimes unsuccessfully, to refrain from questioning the legitimacy of the intentions of other participants. So, I wouldn't suggest that anyone is excusing anything away. That would be IMO unduly personal.

MarLim

AF is not just expensive on oneway fares vs LCCs. I had recently to buy 2 flights for which I wanted to take AF, but in both cases their price offer was just way out vs competition. First was a rt trip on which I took Easyjet, same hours same route (just ORY instead of CDG), for 500% (!) less than AF and the second was a longhaul flight out of CDG where DL was 150% cheaper than AF, not direct and less attractif times though, but not justifying such a price difference. I'm pretty sure AF has done their math with regard to yield management, but also U2 and DL are no beginners at that.

orbitmic

I think that AF's main competitor on short haul routes varies between the SNCF and Easyjet depending on the route. To Marseille or Bordeaux, definitely the TGV, to Nice or Toulouse, definitely Easyjet, etc. However, I don't agree that AF's pricing policy is in any way comparable to the TGV. I have just looked at random dates in approximately one month time (the main time when leisure customers are known to buy trips is approximately one month in advance). A single Paris-Bordeaux comes down to €29 and a single Paris-Marseille to €35 on the most expensive of the three dates which I looked at for each destination (all for high traffic times albeit not available on every train). AF is nowhere near that sort of price. I will grant you that things are a bit unfair for airlines because they need to pay airport taxes which train companies don't but fair or unfair, this is just a given, and the customer cannot be expected to compare whatever the transport company pockets.

As for BA, I actually think that their European pricing model is the most clever of all: economy is mostly for leisure customers, so BA competes with low cost carriers by offering viable one way fares. In business class, they do not want to undersell to corporate customers so keep one way relatively more expensive but cheaper returns with a Saturday night to offer something attractive to leisure customers wishing to travel with extra comfort.

At any rate, when you compare AF and BA:

(1) in 'principle' BA gives cheap singles to Y but not to C, AF gives cheap singles to noone, so Y flyers would be better off with BA and C flyers would be the same to both. How can this make BA worse than AF?

(2) in 'practice', it is even more obviously a case of BA actually giving much cheaper singles to both Y and C customers by a huge margin! Again, one month ahead of time, a single LHR-ATH in C with BA is Ł550, available every single day of the period I looked at, the cheapest CDG-ATH in C with AF is €1285, nearly twice more! (again, every day). Similarly, LON-AMS in C with BA is under Ł300, while CDG-AMS in C with AF starts at €506, and for BCN, it is Ł275 for BA single vs €604 for AF. And the same is true with MAD, FCO, MIL, PRG, and then I stopped comparing!

So basically, I can't think of ANYONE who benefits from the AF one way pricing model as compared to BA's.

But the problem is that it reminds me of when I was in Rome a few weeks ago and while walking on the street I was rather taken aback when passing a restaurant which explained that it specialised in Indian-Chinese-Pizza-Pasta-French-Sushi and I can't remember what other cuisine Frankly, call me a sceptic if you will but I would have been more tempted to skip dinner altogether rather than put as much as a toe in that vile sounding place because I simply wouldn't trust them to do all of that well at the same time.

The other issue is that by saying - essentially - that AF is a purely idiosyncratic airline which thus cannot be compared to either low cost carriers (which don't do business class and first), nor BA (which doesn't do fares that don't get you miles, are not changeable nor prevent you from choosing your seat at OLCI), nor LH, nor pretty much any other airline, we face a double problem: (1) AF's claimed idiosyncrasy is actually defined by its own unique decisions rather than by a unique context (or else we say that every context is unique, that Germany is not France which is not the UK which is not Italy and then prevent ourselves from comparing anything and anyone in principle), (2) we make the AF proposed solutions 'unfalsifiable', meaning that since there is no element of comparison there would be no way (not for us, that we don't care, but for AF herself) to figure out whether her decisions are good or bad, whether anyone else is defining a model that could be imported in part or whole as best practice, etc.

So at the risk of being accused of being over-simplistic as compared to the scenario you sketch, I still think that in the minds of customers, there are essentially two models of airlines: low cost and full service, and that any hybrid will simply end up being 'simplified' as one or the other. The trouble is, AF is betting that it will be perceived as 'full service' by wealthy frequent flyers and as 'low cost' by the poor leisure travellers who want cheap prices so that her new model will mean 'the best of both worlds'. My fear is that it is more likely that it is exactly the opposite that will happen and that it will likely to be perceived as "too full service" by the leisure travellers who can only realise over and again that flying AF costs more when comparing it to the low costs they know such as U2 or riding the TGV, and as "too low cost" by the frequent and business travellers who will be affected by all the cheapening aspects of the product which will be striking when they compare it to the full service carriers that they know such as BA, what remains of LH (since 2U will be branded as a different airline) or TK.

brunos

Indeed, they dont:
http://www.lemonde.fr/economie/artic...7865_3234.html

While AF's "bases de province" apparently failed, Easyjet's are a success.

brunos

deleted

JOUY31

Toulouse will probably go the way of Marseille when the TGV reaches Bordeaux, just as Strasbourg is already suffering the impact of the TGV reaching Lorraine. So, except for Nice, there won't be much head to head competition between Easyjet and Air France out of Paris on short-hauls. On the other hand, I agree that AF faces different competitors on different routes. Therefore, it should adapt to the dynamics of each specific market, something that it does more quickly than in the past, thereby incurring the criticism of not having a unified pure player approach, where I only see different tactical choices.

I now travel regularly to Nancy and Strasbourg, unfortunately by train, and my personal experience is that the cheaper fares are more widely available on round trips, rather than on one-ways.

Well, I believe you are strongly opposed to AF taking out services on the MiNI fares that do not cost them anything. Let's just say that I personally dislike an airline that offers greater flexibility to travellers using the very cheapest fares and not to travellers paying for a higher level of service. It reminds me of the argument that AF needed to cut service levels in l'Espace Affaires in 2004 on the European network because it needed to offer cheaper fares at the back of the plane. But that's just me . On a wider perspective, AF has made a long-standing tactical choice that makes them slightly more attractive to me than other carriers, having a Premium Economy offer that may be enough for my needs, so my personal price comparison with other carriers is based on AF's premium economy fares, rather than Business Class fares. Something that AF has made even more attractive with the extension of the Abonné cards to the Europe-North Africa-Israel network, which makes the availability of cheaper fares not dependent on the availability of specific fare buckets (something I've been asking for over the past six years ...).

That's an interesting comparison, but in the same spirit , I guess you would agree that you would not be put off by a wine bar that offers wine from France, Italy and the new world ... But, in any case, the comparison seems unfair, as there is no network benefit in the restaurant you describe, while there is definitely one in the airline market.

I don't think I ever said that AF should not be compared with other airlines, especially as the differences for example with LH are more "tactical" and both carriers have a common approach, as opposed for example to BA. I do believe that the dynamics of the domestic markets are quite different for example between the UK and the French markets, especially in the way the legacy carrier, LCCs and the trains compete. So applying the criteria of pure players such as LCCs when analyzing the MiNi fares overlooks the fact that the MiNi fares must have a minimum of consistency with other fares on the same market, as seen from the customer, a requirement that LCCs do not need to take into account. In any case, whether this approach works and whether the extent to which AF chooses to not align itself with LCC practices is harmful to its overall business will be decided by the market in the next months and years.

That's what San Gottardo called, IIRC, being everything to everyone. It's also trying to leverage the benefits of a tightly integrated network carrier with one of the largest home market in Europe rather than being the top player in specific markets. While there are some management theories about the issue, the market ultimately decides what actually works for a given player in a given context.

orbitmic

The first thing is that despite what AF sometimes seem to think, the competition (AF and the SNCF) are not passive players. They react to competition. As such, since AF has now all but deserted the Paris-Strasbourg axis (I believe there only remains two daily flights to ORY!), it gives the SNCF, which now uses a yield system on the TGV to charge highly inflated fares to Strasbourg (or even more obviously Nancy which never had air competition) while keeping their best offers for highly competitive routes such as Marseille and Nice. To give you an example, it often costs more to buy a Nice-Marseille than a Nice-Paris train ticket despite the former being only 200km and the latter nearly 1000!

The second issue is that it depends when you book. The SNCF are doing what you don't like in that they offer their most attractive one way fares to leisure passengers who book in advance (they have fine increases at 3 and 4 weeks; for AF it's 4 weeks I believe). But it doesn't change anything: if you try to book Paris-Marseille one way in 2 weeks, AF asks for €121 while the SNCF will ask you €79, in 3 weeks, in 3 weeks, AF asks for €121 and the SNCF for €62, in 4 weeks, AF drops its price significantly and asks for €74 ... and the SNCF for €35. To put it blankly, one of my best friends lives in Paris and but the two main offices she works for are in Marseille and Nice. To Marseille she wouldn't dream of flying and always takes the TGV and to Nice she used to fly AF but now goes for U2 every time especially since (sorry!) I told her about being able to be put on an earlier return flight when she books as a return and finishes early. By the way, it is also interesting to note that U2 systems clearly seem to 'recognise' that she is a frequent passenger and when I had coffee with her the other day, she was quite excited that she now always seems to end up in row 2 or 3 (without paying anything or having any paid membership to anything).

I don't really understand that particular comparison. BA has not worsened anything to anyone. It is not as though they had made one way flights in C more expensive to pay for the cost of making them cheaper in Y. It is just a case of having lowered their costs and chosen to strategically attribute corresponding fare decreases to specific ticket categories: one way (but not returns) in Y, and returns (but not one way) in C. But as I showed in my earlier post, even if you take the customer segments that BA has supposedly least privileged (such as one way C), they are still twice cheaper than AF on the equivalent route!

Finally, BA precisely DON'T do what I dislike which is dismantling costless options simply to artificially differentiate their product. Just as way of an example, BA have now launched their 'hand luggage only' fares. One may like or dislike the move, but at least their pricing model is very transparent and I shall be using it on many of my regular London-Nice flights. In essence:

- You ONLY pay for the checked luggage. You don't lose anything else - you still get the same miles, tier points, seat selection for Gold, Silver, and Bronze customers, bonus tier points, seat selection for everyone at OLCI, possibility to change your ticket etc. If you recall, this is exactly what I suggested AF should do when faced with the cost of checking luggage: make the luggage optional (and paid) on the cheapest fares and don't change anything else.

- If you want the hand luggage only fare, those are over Ł10 cheaper than the previous 'all inclusive' fares. The new all inclusive fare is about Ł2 more expensive. To give a specific example which I know best, on LGW-NCE, the cheapest fare was always Ł49. Now with hand luggage only it is Ł38 while the luggage inclusive fare has become Ł51. I expect this to deteriorate over time, but at the moment at least, I would call this fair pricing. For AF, by contrast, they could not even manage attractive pricing for the launch so I am not holding my breath about evolution over time.) And of course, as always with BA, you can get those cheapest fares as one way pretty much any time till about a week before your flight, and I don't believe than yields are any worse than on AF.

I completely see how premium economy could be a choice that works for some people, but nevertheless, it would obviously be strange to say that we need to compare every other airline to AF rather than AF to every other airline I have just looked at the price comparisons on all the destinations that I mentioned in my earlier post. One-way PE on CDG-ATH becomes exactly the same price as one-way C on LHR-ATH with BA. However, even in PE, AF is still more expensive than the one way C fare on AMS, BCN, MAD, FCO, etc. and airlines like LX are even cheaper. With that you get: (1) no free middle seat, (2) no possibility to sit at the front, (3) hot meals only on flights over 2h30 (although it is worth noting that BA's meals are cold for departure times between 9.30 and 11.59 and between 14 and 16.59 on flight up to about 2h30 too), (4) no coat service, and (5) a bar service that depends on flight time. I would thus argue that PE means that you can "limit damage" service-wise at price which are comparable to or either than other airlines' C rather than allow you to get a suitable 'in between' service at a price which is precisely not in between.

So sure, there will be people to whom AF model will work [e.g if one doesn't care about a free middle seat, only ends up wanting a slightly better meal on flights to ATH, only book returns in Y, in promotional periods and several months in advance to FCO or MAD, never want to recline their seats on routes served by A318s or other aircraft type when you are unlucky enough to get them (had a NEO baddie on CDG-AMS and another on CDG-FCO in recent months. I'm sure it is 'un-usual' but it is still 'un-pleasant' too!)] but I would guess that precisely only a tiny proportion of passengers will be in that position.

I wouldn't be put off by a wine bar that would offer excellent wine from France, Italy, Lebanon, Israel, Australia, Georgia and wherever else (even though it is worth noting that that in itself would be a clear 'wine discovery' or 'wine of the world' branding) but I would be put off by a wine bar that would try and sell me Petrus at the same price or more it would cost at the Ritz and at the same time a pichet of piquette (for non-French speakers, rubbish wine, equivalent to "horse p***") also for 50-100% more than at the bar du coin. I would be more likely to choose to go and have my Petrus at the Ritz for the same price or buy a cheap bottle at the wine fair in Carrefour, but sadly that Bar AF would feature rather low in my list of choices if I decide to splurge on the wonderful nectar. Of course, Bar AF would still know that some people who go to have a drink on company account and whereby the company says 'drink whatever you want because you are high up enough in our bank' might still order the Petrus, but such companies are increasingly few and far between and possibly worse, I wouldn't be surprised if that traitor of a top banker was in fact secretly lobbying the deputy director in charge of the bar policy for transfering the bar contract to the Ritz if at all possible since it will cost the same price and is so much nicer Of course, Bar AF are saying that in a few years they will have a small area in the bar that will be 'best in the bar world, even better than the Ritz' but I could see how the banker might be sceptical and if they need to have a first drink in the main, ugly bar area before being able to continue to have their bottle of Petrus in that great new space that could also make them decide not to bother. (Sorry, your wine bar has inspired me )

I am not unsympathetic to the argument that context should be included in the comparison. But I would like to hold it in the same standard as I do professionally where 'context' is always a key element to take into account in any comparison. I am a firm believer that 'context' should never be mentioned as an abstract theoretical reality (what we would call in the social sciences "an error term" as in "if nothing else explains the difference then it must be culture") but should be disaggregated into specific variables that can be included in models to make them richer. Unfortunately, when AF (not you, AF) talk about the specificity of their context, they never go into anything systematic, and I haven't seen done by any of us on FT yet either so I think it would be a worthwhile exercise. In this sense, I'm not questioning what you say about the French and British domestic competition having some contextual differences in principle and would be happy to hear more about it, but I think it is important to spell out which ones we think matter. To me on the face of it, on London-Manchester or Edinburgh for instance, BA faces the competition of train companies (2 hours to Manchester, 4h20 to Edinburgh), of a new domestic competitor ("Little Red") and to EDI (as well as GLA and ABZ) of a low cost competitor but only from less convenient airport (AF has similar competition from the train, and competition from a low cost competitor only but from the same airport). The train typically offers the lowest cheapest fares but can become more expensive if one wants to book at the last minute and/or with flexibility (same as in France) and the low cost competitor is the same as in France (Easyjet). So personally I find the competitive field reasonably similar on the aspects which I would tend to think matter most on the face of it, but if one of the elements of differentiation (the presence of a new full service competitor or the fact that the low cost carrier flies from less convenient airports or something else which I haven't pointed out) I think it would be useful to say why it matters and even more importantly what it makes a BA-style option sub-optimal in the French case while it would be optimal in the UK.

That I fully agree with, but it has never prevented FT from existing I actually find all those debates interesting and often enlightening and in many ways, I would argue that trying to predict what will work or not and why is a natural bias on the part of people with a keen amateur interest in an area. Football fans always predict which team will do well or not, stock exchange specialists always comment on the strategic decisions of companies and which are likely to work or not, etc I guess we are merely doing the same with airlines

San Gottardo

Why personal? I didn't quote anyone or address any poster or a specific post by a specific poster.

You are saying that AF tries to balance several passenger groups' interests, and I agree. But how does not offering attractive oneway fares - which adresses the interests of the price-sensitive customer segment, i.e. the one that Mini targets - compromise the attractiveness to the more "premium" customer segments? Will AF lose any pax at higher prices who will say "I shall move away my business from Air France because they offer attractive oneway fares to that other segment that I do not belong to "? I don't think so.

Thus, back to what I still find a mystery: if Mini wants to address the price-sensitive segment, then why doesn't it compete properly, i.e .on price? If Mini does not want to address the price-sensitive segment, which customers does it seek to attract? If no specific customer segment is targeted because it is felt there is no competition anyway, then why bother introducing the Mini fares in the first place?

And that is where I feel that some posts - including yours - are dodging the question and presenting arguments that I find contradicting. They start out by saying Mini is great because it will take market share in the segment of price-sensitive customers, then we find that in the price-sensitive segment they cannot compete on price, then we are offered the explanation that in any case they do not want to compete because they have to please several customer segments, and then it is being argued that by not competing on price in the price-sensitive segment Air France is better addressing the needs of the premium segment. Sorry, but I am lost, actually more so than before.

Hmm. I actually think that the parallel between that multi-cultural restaurant in Rome and AF's "balkanized" strategic positioning is more relevant than the comparison with the wine bar. In the wine bar they only have to sell the product, but not make it. In the restaurant they have to make the product. For selling I need substantially less specific expertise and customized processes than for making it. Same goes for airlines: I give more chances of success to a travel agent that sells both Singapore Airlines and JetBlue flights than to one single airline that seeks to be Singapore Airlines and JetBlue at the same time.

The debate about the incoherence of the offering has been led by JOUY31, brunos and orbitmic in the last couple of posts so I won't add to it (plus I have posted my conviction about it in previous posts). Therefore I limit my contribution to just one question: can someone give me one single industry in which you have open competition where "stuck in the middle" players have succeeded in the long run and sustained their market share against the competitive pressure of segment specialists? I cannot think of one single industry. There are industries where legacy players that found themselves stuck in the middle have survived. But either they lost significant market share or they have survived only after massive and painful transformation adapting them to new market realities. Think of US airlines as one example and their Chapter 11 painful transformations as one example.

Last point, on armchair CEOs on FlyerTalk: sure, we all are. Except that - forgive me the boasting -on Air France and them expected to perform poorly I was right over the past couple of years. The amounts of capital that company has destroyed over the past couple of years is absolutely phenomenal.

JOUY31

No, but as I have seen in different cases, they might move away from their corporate fares or Abonné fares, as the need for flexibility addressed by these more expensive fares could also be addressed, as seen by accountants or some decision makers, by purchasing a MiNi fare, throwing it away in case of changes and purchasing another MiNi fare.

I personally believe there are different segments in the price-sensitive market. Ryanair customers apparently do not have the same sensitivity to price as Easyjet customers. And even the same individual usually does not have the same price sensitivity when travelling for leisure or travelling on corporate business. For some Ryanair customers, Easyjet fares are considered too expensive, while for some Easyjet customers, slightly lower fares will not make up for the lack of customer care in case of irrops. So, I would guess that the MiNi fares are targeted at the part of the price-sensitive market that AF believes 1) it has lost over the past years to competitors with lower fares 2) it can win back, because the fare differential is back below their sensitivity threshold.