Until Air France-KLM implements a long-term cohesive strategy, it probably will keep falling behind its main competitors, International Airlines Group and Lufthansa Group. But unless the macroeconomic environment changes, it should be OK. Even with rising fuel prices, now is a good time to be in the airline business.
If you must run a massive global airline with three CEOs working as a committee, amid labor unrest with major labor unions, now’s probably not a bad time for it.
Yes, fuel costs are rising, but prices remain far below their peak. Most other indicators are strong and demand for air travel is booming, particularly across the Atlantic. Even legacy airlines with suspect business models are making money, despite competition from low-cost carriers.
Perhaps with less favorable trends, Air France-KLM might be in trouble. Its CEO, Jean-Marc Janaillac, resigned last month after Air France’s unions signaled they would reject his offer for a modest raise. It is temporarily being led by three executives: KLM CEO Pieter Elbers, Air France CEO Franck Terner, and Frederic Gagey, chief financial offer of Air France-KLM.
I spoke with Elbers this week in Sydney at the IATA Annual General Meeting. It’s his job to spin, but he said the company is in a “stable situation,” while executives wait for the board to appoint a permanent leader. Elbers urged patience from stakeholders.
“If you see where we were at the end of ’17, the results have improved, both at Air France and KLM,” Elbers said. “Transatlantic was thriving. Our network in countries like Brazil was developing, so really things were moving in the right direction. It is bad today with the strikes, there’s no doubt about it, but if you look at the bigger picture, it’s of two strong hubs and two strong brands, a great network, a very loyal customer base. They are still there.”
At least one major investor seems to buy the spin. This week, my colleague Deanna Ting reported AccorHotels may want to buy a substantial stake in Air France-KLM. Accor said an investment might make sense so the companies can develop “joint digital projects as well as a joint loyalty and services platform.”
What do you make of all the drama? Let me know via email or on Twitter.
Stories of the Week
Air France and KLM Will Stay Together Despite Recent Turmoil: KLM CEO: There’s no doubt many KLM employees — and probably some in the Dutch government — are fed up with the turmoil at Air France. KLM is a point of pride for the Netherlands, and it’s a strong airline with competitive costs and solid service. But Air France is a mess. It makes sense that some have wondered if KLM could break apart. But that won’t happen.
What Accor’s Interest in Air France-KLM Means for the Travel Industry: If you’re interested in the hotel business and you’re not following my colleague Deanna Ting, you’re making a mistake. Ting is covering Accor’s possible investment in Air France-KLM from the hotel perspective, and she knows her stuff. Here, she looks into why Accor might want a stake in what was once Europe’s largest airline company.
Emirates President Won’t Rule Out More U.S.-Europe Nonstop Flights: Emirates President Tim Clark is as feisty as ever. During a roundtable with media Tuesday in Sydney, I asked him if Emirates promised to stop adding new nonstop routes between Europe and the United States. “If we wish to do more points in the U.S. or more intermediate points at some point, there is nothing that stops us doing it, contrary to what others seem to be saying to the media or believing,” he said.
Hawaiian Airlines CEO on Staying Small While Withstanding Competition: U.S. and Asian airlines have been adding capacity to Hawaii for the past couple of years, and Southwest soon will add flights. Is Hawaiian ready for the new competition? And will the airline consider adding new markets, such as Europe, when its Boeing 787s arrive? Read my interview with Hawaiian CEO Peter Ingram for details.
Behind the Hype of Qantas’ Grand Plans to Fly Nonstop to London and New York: You have to give Qantas credit for its public relations strategy. It will be at least four years before the airline launches “hub-busting” flights to New York or London from Sydney, but the airline already has almost everyone in the industry talking about its plans. This week in Sydney, it teased that it might use new ultra-long-haul flights to revolutionize economy class.
American Not Ready to Resume Commercial Ties With Etihad and Qatar Airways: Journalists grilled American Airlines CEO Doug Parker on Sunday about world affairs. It was unusual, considering he usually answers questions about capacity, or the passenger experience. But airlines are global businesses that rely on free trade agreements and deals negotiated by diplomats. Recent protectionist moves by some governments may not bode well for airlines.
Absence of Women in Aviation Leadership Roles on Full Display at Industry Gathering: Kudos to Bloomberg for this story. There were remarkably few women at this week’s IATA AGM, and Bloomberg picked up on it. We know there are almost no female CEOs of major airlines, but there aren’t that many senior women executives either. Most agree that needs to change, but no one is sure how to do it.
Delta CEO Dismisses Threat From Low-Cost Transatlantic Airlines: European and U.S. airlines years ago underestimated the threat posed by short-haul discount airlines. Since then, legacy carriers have treated transatlantic low-cost airlines as serious competitors. But there’s reason to believe the low-cost model may not be as appropriate for longer routes. At least that’s what Delta’s Ed Bastian hopes.
United Loyalty Boss Luc Bondar Relaunches Explorer Card to Compete With Premier Rivals: Skift freelancer Grant Martin spoke with the head of United’s loyalty program, and learned that he wants to improve at rewarding infrequent flyers. He said it makes senses that airlines want to reward their best customers, “but we can’t do so at the cost of not understanding or appreciating or providing for the value that our general members are looking for when they make those decisions to fly United once a year, twice or three times a year.”
Skift Tech Forum Preview: Sabre’s CEO on Going Technology-First: Sabre has cut staff and invested in technology in an effort to remain relevant. How’s it going? Skift’s Andrew Sheivachman spoke with Sabre’s Sean Menke about his plans to turn around the company. “There’s more to be done, but we have already accomplished a lot and we are making more progress every day,” Menke said. Do you believe him?
Skift Tech Forum Preview: Kayak’s Chief Scientist Confident on Fare Predictions: I prefer to rely on my own hunches about when to buy the cheapest airfare, but that’s mostly because I enjoy it. Kayak is probably better. “Given the complexity and dynamics of airline pricing, nobody’s predictions will ever be 100 percent certain, but by analyzing current and past flight prices, we are able to provide a confident recommendation to our users on whether to book now or wait,” Matthias Keller, Kayak’s vice president of technology, told my colleague Dennis Schaal.
The Exceptional Jet Singapore Airlines Will Use for the World’s Longest Flight: To fly to New York and Los Angeles, Singapore is taking the Airbus A350ULR. But Singapore is only getting seven of the jets, and Airbus has sold many others. How do the economics work for Singapore to fulfill such a small order? Bloomberg’s Justin Bachman has the scoop.
Keep in Touch
Skift Aviation Business Editor Brian Sumers [[email protected]] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send him an email or tweet him.
The Daily Newsletter
Our daily coverage of the global travel industry. Written by editors and analysts from across Skift’s brands.
Have a confidential tip for Skift? Get in touch
Photo credit: Dutch airline KLM, which flies the Boeing 787, among other aircraft, has a strong reputation and is profitable. But it is tied to Air France, which has been struggling with labor issues. KLM