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Full-service carriers like Air France are copying some budget operators like Ryanair to compete with them by minimizing cash burn during the pandemic. But a long-term shift is also underway in Europe. Climate change mandates from Western European governments are prompting carriers of all types to rethink and prune their networks built up over the years.
As part of its bailout packages, the French government has been pushing to cut the country’s domestic routes that fly about two hours or less. The push affects both traditional carriers like Air France and relative newcomers like Ryanair. Austria imposed similar short-haul flight restrictions on Austrian Airlines, owned by Lufthansa Group, earlier this year.
“There were conditions coming with the support of the French government, and one of the conditions is to reduce our environmental footprint a lot quicker, especially on the domestic front,” said Anne Rigail, CEO of Air France on Thursday at Skift Aviation Forum held online.
“We have closed some non-connecting routes from Paris where there were alternatives on routes below two hours and thirty minutes,” Rigail said. “We are working with the French railway, SNCF, to improve our intermobility and connections. Environmental awareness is becoming more acute. We are adding a lot of actions to make it a first priority of the airline.”
Rigail is attempting to profoundly transform Air France’s domestic flight network, which had been running losses for years and saw those losses deepen when low-cost carriers increased their competitiveness domestically in the past two years. Air France also has its low-cost brand, Transavia, which tries to compete on equal terms with the budget brands.
Long-standing network carriers are taking steps to compete with the low-cost brands. This week Lufthansa Group said it would stop offering free meals on short-haul flights.
Air France has no plans to mimic the move.
“We don’t think of going to buy-on-board at this stage,” Rigail said.
But the carrier is looking to save money in other ways. Rigail said that Air France could replace, on some aircraft, a portion of the business class seats with economy class one within a single day of labor, helping to make the carrier more competitive with budget carriers.
“This crisis is a catalyst for transformation,” Rigail said. “In terms of economic performance, we hope to emerge stronger than the competition because we don’t have a choice. Everyone is totally committed to lowering our costs to transform our business with 150 initiatives.”
Eddie Wilson, who was appointed CEO of Ryanair DAC one year ago, reporting to Ryanair Group CEO Michael O’Leary, had significantly different takes on some of these issues in his interview with Matthew Parsons, Skift’s corporate travel editor.
Ryanair has launched lawsuits over some of the bailouts and related governmental moves toward carriers across Europe.
“The European Union was set up to have a free market, and now what you have is an airline that used to be owned by a government, just by virtue of the tail and colors it has on the aircraft, gets a huge bailout for no good reason other than it looks broadly like the national flag,” Wilson said. “That’s seriously discriminatory…. In France for example, there’s a rebate on taxes for airlines but only if you’re French…. You’ve got Lufthansa being bailed out to the tune of about 11 billion euro, and they’re back for more money.”
Wilson scoffed at the notion that European’s network carriers will emerge from the crisis stronger than before.
“The tide has gone out,” Wilson said, suggesting that the revenue crisis has exposed many other carriers as having weak business models. “The major legacy carriers are going to be saddled with debt.”
“We’ve got the lowest unit costs in Europe,” Wilson said. “Our nearest competitor last year would be nearly 25 percent higher…. This business for us has always been about costs.”
On the efficiency front, Wilson said Ryanair’s costs would drop further once it could take possession of new Boeing 737 Max jets, which have finally been cleared for safety evaluation and promise lower fuel and operating costs.
“On aircraft, we’re ahead of everybody else on a seat basis,” Wilson said. “Now we’re going into the Max order, where we’re going to have eight extra seats and 16 percent less fuel, and that’s going to drive that down even further,”
However, Ryanair doesn’t need more 737 Max aircraft than what it has ordered. Ryanair does see a potential to acquire cheap aircraft as the crisis winds on, Wilson said.
While Rigail of Air France was upbeat about the potential of testing at airports to accelerate travel, Wilson was bearish.
“As I’ve said to many airports, if testing is working and you can test everyone going through an airport, then you don’t have enough passengers,” Wilson said. “We’ve become a bit obsessed with this idea we’re going to have people walk through the equivalent of a car wash or something. The idea you can recover traffic through testing at airports, well, it can’t work.”