Air France's new strategy: focus on premium segment
Jan 25, 2019, 5:45 am
#16
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I guess I'm in the minority of Y pax then 
I don't mind paying a bit more for AF for my travels or adding the connection at CDG (being based out of FRA) because their Y product is better than LH.
But I guess I'm a disappearing type of customer. *sigh*
It would be disappointing to have Buy on board for intra-Europe flights, as I think other full service carriers (LH) offer a snack and beverage. I guess the answer really is to buff up the C and W class offerings.
I don't mind paying a bit more for AF for my travels or adding the connection at CDG (being based out of FRA) because their Y product is better than LH.But I guess I'm a disappearing type of customer. *sigh*
It would be disappointing to have Buy on board for intra-Europe flights, as I think other full service carriers (LH) offer a snack and beverage. I guess the answer really is to buff up the C and W class offerings.
I don't think they will go BoB, it's just not in their DNA. I think it will be a question of reducing other services, such as champagne (which is available in Y on AF), meal quality, magazines and papers which still seem to be available to all.
Jan 25, 2019, 6:09 am
#17
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To me if they want to cut back on Y, the best is to do it like what Qantas and I believe LATAM is now doing, just have a drink run, a big main meal and a tea/dessert run. This keeps at least the quality there and the portions reasonable. Problem is that AF tries to serve a typical French based spread which leads to cost and therefore reduces quality, etc.
Cheers!
Jan 25, 2019, 6:45 am
#18
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No you're not, I'm right there with you. I have chosen AF for longhaul in the past because I know the Y product is better. And I've been glad I did so.
I don't think they will go BoB, it's just not in their DNA. I think it will be a question of reducing other services, such as champagne (which is available in Y on AF), meal quality, magazines and papers which still seem to be available to all.
I don't think they will go BoB, it's just not in their DNA. I think it will be a question of reducing other services, such as champagne (which is available in Y on AF), meal quality, magazines and papers which still seem to be available to all.
I guess if I had to suggest something to cut (I work in accounting, I know there is nothing free !), I could do away with the free press/magazines. It's nice, but I would be okay paying at the kiosk for my copy of Le Monde. But that's drops in a very large bucket of savings to fill. Otherwise, maybe reevaluate the profitability of some routes, maybe trim some back ?
Jan 25, 2019, 7:51 am
#19
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I guess if I had to suggest something to cut (I work in accounting, I know there is nothing free !), I could do away with the free press/magazines. It's nice, but I would be okay paying at the kiosk for my copy of Le Monde. But that's drops in a very large bucket of savings to fill. Otherwise, maybe reevaluate the profitability of some routes, maybe trim some back ?
It would be a painless change, "in the name of environmental friendliness", but I am not sure it would be really efficient in terms of cost cutting.
Jan 26, 2019, 2:17 am
#20
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As for improving the Premium cabins, indeed for J - the offerings is already quite ok. I just hope that they will improve the soft service in Prem Y which for now is one of the worst in both hard and soft product (at least in my opinion).
Can't wait to see how this whole strategy will turn out.
Cheers!
Can't wait to see how this whole strategy will turn out.
Cheers!
Jan 26, 2019, 5:55 am
#21
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One has to wonder if there is much cost at all to the press. I understand it's quite common by press publishers to give away publications either free or at a very much lowered price to many such providers as airlines, rail companies, libraries, universities etc. as a form of marketing.
Jan 26, 2019, 7:47 am
#22
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Even if airlines do not pay the publication itself (which I would think they still do in a number of cases, not all are given for free) - the publishers do not pay the cost AF has to distribute the material in its airports, lounges, on planes, and to afterwards deal with the leftovers. Which is one of the reasons why airlines have started to distribute media through tablets.
Jan 26, 2019, 9:42 am
#23
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Being based in Chicago, and frequently booking into C/J one way or the other on TATL, AF is usually my last choice - especially for connecting to elsewhere. ORD is an afterthought to AF - the dreaded A340's seemed to pop up too much as a special 'surprise'. For a few years (not anymore) AF subbed out this flight to DL to operate in the winter on a crapped out old 763 - that was preferable!
KL (and a host of other ST choices) seem to understand the possibilities in the market much better in terms of potential revenue from J/C. Yes, CDG is not a huge business market like LHR, but there is a lot of connection opportunity there. But, then again, CDG is a lousy connecting airport as well. Better wine is about it on the 'reasons why to choose AF...' list.
Again, AF is usually my last choice (well, except for AA) TATL.
KL (and a host of other ST choices) seem to understand the possibilities in the market much better in terms of potential revenue from J/C. Yes, CDG is not a huge business market like LHR, but there is a lot of connection opportunity there. But, then again, CDG is a lousy connecting airport as well. Better wine is about it on the 'reasons why to choose AF...' list.
Again, AF is usually my last choice (well, except for AA) TATL.
Jan 26, 2019, 3:22 pm
#24
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ORD isn't really a Skyteam hub to begin with, so unsurprisingly AF wouldn't give much thought to it- for years when I lived in the US I was surprised they even flew there. Better to focus on premium heavy US routes like JFK and IAD or hubs with more Skyteam correspondances (ATL or DTW).
Jan 26, 2019, 4:11 pm
#25
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True, ORD isn’t really a SkyTeam hub, but neither is Houston, Dallas, Boston or Toronto. And yet, Houston only recently moved to A332 and will revert back to 77W with Premiere in summer, Boston gets two flights a day during many months, and Toronto gets more « premium » equipment (BEST onboard the 772) than Chicago. For some reason Chicago gets little love, despite being the third largest city in the US and a major economic powerhouse.
Jan 26, 2019, 6:49 pm
#26
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I find Ben Smith's strategic approach interesting.
Whilst at least for my remaining working life I probably fall into the customer segment that they target and therefore welcome that move, I also see all the challenges. Air France is caught between a rock and a hard place:
Whilst at least for my remaining working life I probably fall into the customer segment that they target and therefore welcome that move, I also see all the challenges. Air France is caught between a rock and a hard place:
- They'll never win on cost. The France-specific labour cost issues and the deeply engrained conviction not to be an LCC just won't allow them to go there. That doesn't mean that they don't have to make efforts on the cost side, they do, because whatever other strategy they pick none will generate a top line that will be strong enough to eliminate any cost disadvantage
- Recognizing that AF cannot win with a cost-based strategy is lucid - but then, is a strategy that is merely "let's go premium" the only possible answer? They run away from one problem - and possibly straight into the wall. To be fair, I suspect (at least I hope) that their strategic thinking is more sophisticated and not a simplistic "let's be premium", but also has elements around network management, alliances, operating model, etc. Being premium could be the overarching motto, but if all they do is take the current operations of the airline, put in new seats and pay higher salaries then they'll fail.
- Especially on the network there may be some quite drastic changes. Saying goodbye to "we cover so much of Latin America" and pulling out of Cancun, Santo Domingo and Fortaleza may dent the ego of some people who think that France's flag has to be seen all around the world or that feel that they work for a second class company only because it has a smaller network; LatAm is just an example. Being able to fill more flights to Chicago, Mumbai, Houston and Chengdu (to just pick some which are currently served with little capacity but that are bigger for some of their Euro competitors) will be the thing to achieve. Positioning KLM as the not-so-premium carrier may be part of the solution, whereby the AFKL group can still serve some places with less frequency and smaller premium cabins whilst still offering them.
- What "being more premium" will mean beyond putting in BEST or similar cabins remains to be seen. On the hard product side BEST is already pretty good and definitely doesn't have to hide itself behind what other European players have to offer. Some touch-ups on catering would be nice (it's actually not as good as people sometimes want to believe, but it isn't terrible either), and some elements of the service protocol. The Non-BEST business class product is of course spectacularly sub-par and needs to be kicked out ASAP. The question of having on-board WiFi then becomes more relevant as well.
- More work needs to be done on the ground: lines at security and immigration are simply too long, and lounges too underwhelming. Transfer services, a layout that allows for OSS transfers also for some intercontinental connections, better IRROPS management - these are some elements that spring to mind right away.
- Also the FFP is still short on offering some of the things that others (in this especially the US carriers and the Lufthansa Group airlines) have put in place to serve the premium/business segment much better. Ultimate was supposed to solve some of these things but is largely a failure (do you know any business/premium traveler that picks AF just to access the benefits of Ultimate?), whilst Platinum is a bit closer. Elements such as offering lounge access upon arrival (I don't mean the longhaul arrivals lounge, but being able to access the lounge in Berlin, Marseille, Paris or Amsterdam after arriving on AFKL to spend productive/pleasant time before leaving the airport for a meeting which only starts later) or booking guarantee (I can be as willing as I want to rely on an airline to get me to where I need to go when I need to go and pay premium fares for it - if they don't sell me a seat then that's all useless) are practical perks to frequent travelers
- Lastly, I see some real challenges for AF to make this strategy a success. Not to say it's impossible, but if not recognized their attempt may end up as a failure:
- Paris isn't London, so the premium market is smaller. But then, Frankfurt, Zurich or Munich are even smaller premium markets and there the local carriers manage to have a premium-oriented offering
- Financial stamina: before reaping the rewards (=attractive margins) of a premium-heavy carrier they first need to invest. The time lag between investing and seeing return on those investments may be in the order of 4-5 years, possibly even more. Things will even evolve slower if there is a longer period where only a part of the offering can keep up with the aspiration and marketing. AF doesn't have the deep pockets to fund that transition, at least not without hitting their bottom line
- Culture, v1: when AF says "premium" and then talks about their natural right to win because France (and thus by extension Air France) is good in luxury and taste I am afraid that they miss the point. The majority of premium travelers are not people that pick the front section of the plane because of the tasteful choice of colours in the cabin or the stylish uniforms of the FAs - those things don't compensate for a SNAFU when bad weather, tech problems or a strike hits or when having to waste time because of chaotic boarding processes or slow luggage delivery. To attract premium travelers AF needs to work on reliability and being "practical" and easy to use, giving time back to travelers and avoiding to stress them with fears of what configuration the next flight will be on. However, being pragmatic, efficient, reliable and consistent is as much an Air France strength as being fuel-saving is a strength of Ferrari cars. This is not to say that the practical elements are sufficient, absolutely not. There needs to be a minimum level of comfort and style - but beyond a certain point it becomes useless if the practical/consistency elements is a failure.
- Culture, v2: the behaviours that come from people employed at a state-owned monopoly carrier do still exist in AF, in too many places. Treating the company like one's own property (upgrading friends and family) but at the same time being reluctant to make extra efforts for its success is something that is still wide-spread. Less so in customer-facing staff maybe, but definitely in other parts of the airline. That is a handicap.
Ben Smith had bought social peace by granting a pay raise across the board. That costs a lot of money. He has plans to harmonize J seats on the whole fleet. That means that the whole fleet should be retrofitted with Cirrus-like seats and that plans for A332 and Joon's A350 should be changed. A380s will possibly be axed progressively, meaning that some major destinations will suffer NEV3 and 4 for quite a few years. Better PE seats should be retrofitted. Before getting to a consistent premium product it will take numerous years (say 5+).
AdJ quickly encountered financial constraints and AF current financial situation is not significantly better. BS has a much better managerial approach and less arrogance than ADJ. But consistency in premium product will only yield results slowly while expenses staff pay/investments are immediate. The risk is that it could result in a "spend and tax" customers. Hopefully, BS will produce miracles and I am all for it. But like San Gottardo pointed out, a major handicap is the state-owned culture that remains pervasive at AF.
As long as consistency in seat and all other aspects is not achieved, I will keep avoiding AF LH when I can. I always look forward to a flight on CX or SQ J. Even better on QR; I might not get the double-bed Qsuites with my wife and AC keep changing, but I know that it will be an excellent experience whatever the plane. Even with BA J, I feel relax. The product is not great (although I like the window seats), but it is consistent with no bad surprise. AF unfortunately retained some of its Air Chance nickname.
Last edited by brunos; Jan 26, 2019 at 7:26 pm
Jan 27, 2019, 3:44 am
#27
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True, ORD isn’t really a SkyTeam hub, but neither is Houston, Dallas, Boston or Toronto. And yet, Houston only recently moved to A332 and will revert back to 77W with Premiere in summer, Boston gets two flights a day during many months, and Toronto gets more « premium » equipment (BEST onboard the 772) than Chicago. For some reason Chicago gets little love, despite being the third largest city in the US and a major economic powerhouse.
There are up to 6 AA/BA flights a day between LHR and ORD and up to 7 UA/LH flights between FRA+MUC and ORD (not counting the flights on other alliance OW/*A airlines, such as IB, LX, SK, etc...). This does not leave a huge amount of room for AF/KL/DL to CDG/AMS.
Last edited by NickB; Jan 27, 2019 at 3:53 am
Jan 27, 2019, 12:36 pm
#28
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Johan
Jan 28, 2019, 6:56 pm
#29
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Apparently Ben Smith is not so popular with KLM staff, article also states that he is not going along well with Pieter Elbers.
Source (in Dutch)
Here a quick Google Translate:
Source (in Dutch)
Here a quick Google Translate:
SCHIPHOL - CEO Ben Smith of Air France-KLM rejects the rumors that KLM would continue as a 'B-airline' within the Air France-KLM Group. The Canadian made it clear on Monday morning during his visit to KLM's crews center at Schiphol.
Annette Groeneveld, chairman of the Dutch Cabin Staff Association (VNC), was present at the meeting. According to her, this was one of the few concrete answers he gave to the questions of the KLM staff present. "Smith has shown his mastery in giving general answers to the often urgent questions of the angry staff."
Asked about the dominance of Paris as the seat of the group, the Canadian said that this is a coincidence. "That could have been Berlin," he reported. When asked what his opinion is about the fact that KLM does so much better in terms of net result, Smith replied that this is due to a different taxation system in France.
In everything that Smith told, it was strikingly not mentioned the name of KLM CEO Pieter Elbers. Not even when he told him about his plans to come soon, the name 'Pieter Elbers' was not mentioned as a stakeholder in this process.
Where the previous CEOs of Air France-KLM Elbers judged on his merits and complimented him it is painfully quiet from the Canadian. Elbers was also present at this meeting.
Not welcome
It does not collide between the Dutchman and the Canadian. A few months ago it became increasingly clear that Elbers no longer qualifies for the post of second man in the aviation combination. Conversely, Smith is not welcome within the Supervisory Board of KLM.
At the beginning of January, another painful moment occurred when Smith appeared at the New Year's reception of the Dutch pilots union VNV. His presence then led to an uncomfortable situation for KLM CEO Pieter Elbers and COO René de Groot. To date, the Parisians did not show up at this kind of meeting of one of the KLM unions.
In the Netherlands, there is now something wrong with the KLM Supervisory Board. The deadline for Elbers expires in April and Smith would have indicated that he does not want to go any further with the Dutchman, who could make KLM shine in the past four years with good results and relative calm within the organization.
Reappointment
Elbers himself, during an interview with Luchtvaartnieuws Magazine in December, said he would like to add at least four new years as CEO. Travel media (publisher of this platform) has communication that shows that KLM's Works Council is doing everything it can to enable Elbers to reappoint quickly.
Annette Groeneveld, chairman of the Dutch Cabin Staff Association (VNC), was present at the meeting. According to her, this was one of the few concrete answers he gave to the questions of the KLM staff present. "Smith has shown his mastery in giving general answers to the often urgent questions of the angry staff."
Asked about the dominance of Paris as the seat of the group, the Canadian said that this is a coincidence. "That could have been Berlin," he reported. When asked what his opinion is about the fact that KLM does so much better in terms of net result, Smith replied that this is due to a different taxation system in France.
In everything that Smith told, it was strikingly not mentioned the name of KLM CEO Pieter Elbers. Not even when he told him about his plans to come soon, the name 'Pieter Elbers' was not mentioned as a stakeholder in this process.
Where the previous CEOs of Air France-KLM Elbers judged on his merits and complimented him it is painfully quiet from the Canadian. Elbers was also present at this meeting.
Not welcome
It does not collide between the Dutchman and the Canadian. A few months ago it became increasingly clear that Elbers no longer qualifies for the post of second man in the aviation combination. Conversely, Smith is not welcome within the Supervisory Board of KLM.
At the beginning of January, another painful moment occurred when Smith appeared at the New Year's reception of the Dutch pilots union VNV. His presence then led to an uncomfortable situation for KLM CEO Pieter Elbers and COO René de Groot. To date, the Parisians did not show up at this kind of meeting of one of the KLM unions.
In the Netherlands, there is now something wrong with the KLM Supervisory Board. The deadline for Elbers expires in April and Smith would have indicated that he does not want to go any further with the Dutchman, who could make KLM shine in the past four years with good results and relative calm within the organization.
Reappointment
Elbers himself, during an interview with Luchtvaartnieuws Magazine in December, said he would like to add at least four new years as CEO. Travel media (publisher of this platform) has communication that shows that KLM's Works Council is doing everything it can to enable Elbers to reappoint quickly.
Jan 28, 2019, 9:13 pm
#30
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KLM and their staff always had tense relations with AF management. Nothing new.
Pieter Elbers is 48 and spent all his career at KLM. He was of the many considered for AFKL CEO job but drew opposition from the French side. BS might want to have a "docile" KLM CEO when Elbers' mandate expires.
On the other hand, journalists like to write provocative articles that blow some signals out of proportion.
Pieter Elbers is 48 and spent all his career at KLM. He was of the many considered for AFKL CEO job but drew opposition from the French side. BS might want to have a "docile" KLM CEO when Elbers' mandate expires.
On the other hand, journalists like to write provocative articles that blow some signals out of proportion.