Air France-KLM to recapture market share from low-cost rivals

PARIS, France - Air France-KLM posted a sharp increase in core profit for the second quarter and announced a 2015-2020 plan yesterday to recapture market share from low-cost rivals in Europe.

Air France-KLM to recapture market share from low-cost rivals

PARIS, France – Air France-KLM posted a sharp increase in core profit for the second quarter and announced a 2015-2020 plan yesterday to recapture market share from low-cost rivals in Europe.

Europe’s second-largest traditional carrier by revenue joined rivals Lufthansa and IAG in trying to win business from low-cost champions such as easyJet. It said it was prepared to use acquisitions to achieve its aim. Air France-KLM has been cutting costs and debt as part of its three-year “Transform 2015” plan, which is due to end in a few months.

Its new plan, “Perform 2020”, will focus on maintaining the groupÕs position in long-haul markets in the face of competition from Gulf carriers while looking to capture growth and cut costs in short-haul markets.

“The consolidation of the low-cost sector is underway and we want to take part,” chief executive Alexandre de Juniac said.

“The idea is to be in the leading group of European low-cost carriers, given that aviation is a business where size is important,” he said.

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The company also plans acquisitions in maintenance and overhaul where it wants to offer services to external clients.

Details of the plan, which follows a review by the head of the airlineÕs French unit, will be announced in September.

The plan to counter the low-cost boom in Europe comes weeks after Lufthansa’s new chief executive announced plans to expand its low-cost services under new brands, though some analysts have questioned the move.

Several network carriers have already set up or acquired their own low-cost units to mimic the success of Britain’s easyJet and Europe’s largest budget carrier, Ryanair. They include Lufthansa’s Germanwings and Vueling, which is owned by British Airways/Iberia parent IAG.

But running low-cost operations, based on point-to-point travel, alongside the hubs and frequent-travel schemes of large union-based carriers is rarely simple, analysts say.

“Very few airlines have managed low-cost operations that are really low cost. The only one really doing so is IAG,” said aviation consultant James Halstead of UK-based Aviation Strategy.

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