Air France-KLM Plans New Budget Airline to Rival Gulf Carriers

Franco-Dutch airline company Air France-KLM has revealed plan to launch a new distinct airline that will operate long- and medium-haul international fights in a bid to wrestle customers from fast-rising airlines from the Middle East.

The new airline, which has yet to be named, will be used by Air France-KLM to provide business and economy travel on some new and reopened routes, the carrier said. It would operate international routes where its parent company has found it hard to operate for years due to profitability concerns arising from intense competition and low fares.

“It will be focused on ultra-competitive markets and will enable (Air France-KLM) to go on the offensive by opening new routes, re-opening routes closed due to their lack of profitability and maintaining route under threat,” the biggest European airline group said in a statement.

Discount airlines have started to grow their presence in Europe with low rates that put pressure on continental aviation powerhouses. Competition from Emirates Airline, Etihad Airways and Qatar Airways – three Gulf carriers – has especially been increasingly intense. These non-European airlines, along with Turkish Airline, have been using their geographically helpful hubs to full advantage on routes that connect Asia to Europe and North America.

Air France-KLM’s chief executive officer Jean-Marc Janaillac said the growing influence of the Gulf carriers was not acceptable in the European airline group’s bid to maintain leadership position in its markets.

“This new company will constitute the Group’s response to the Gulf State airlines which are developing at low production costs on key markets where Air France-KLM is pursuing its growth ambition,” the leading European airline holding company said.

The proposed airline is part of Air France-KLM’s nine-point plan christened “Trust Together” aimed at improving the company’s competitiveness. The plan also aspires at improving efficiency of plane use and greater cooperation with American partner Delta Air Lines.

The airline company will be providing fewer frills on the new airline, compared to its standard service, to enable it compete favorably against Middle East rivals. Pilots and cabin crew will be engaged on different terms to those of the main company.

Air France-KLM has, however, attempted to dismiss any thought that the proposed unit will be a full-blown discount one. It said business travelers and tourists will enjoy standards comparable to what it has been known for in terms of crew professionalism and product quality.

The initiative is seen as an attempt by new boss Janaillac to improve on years of job losses and conflicts with trade unions.

However, the Syndicat National du Personnel Navigant Commercial (SNPNC) cabin crew union has said the new airline would be “low cost” for its members. It is afraid that its staff would not enjoy similar work benefits as that of the main company.

This is not the first time Air France-KLM will attempt to create a reduced-cost unit. Previous attempts had been foiled by its workers’ unions.

One of the ways the company hopes to avoid confrontation with unions this time is to allow pilots move on their own volition to the new airline while continuing to enjoy previous pay.

The planned carrier is expected to have up to 10 planes by 2020.