Exposé Air France PDF

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Exposé en anglais sur Air France : la stratégie de Air France prévue depuis aujourd'hui jusque dans 5 ans...

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STRATEGIC ORIENTATION OF AIR FRANCE IN 5 YEARS FROM NOW EUROPEAN LEVEL

Company overview The group Air France-KLM has three different activities : the passenger transportation, cargo and the aeronautical maintenance. Air France is a global leader of the airline industry. The company is practicing its activity in around 318 destinations, in 118 different countries and more than 80 000 employees regarding the annual report of 2018. Moreover, it has, as we said previously, three businesses, more than 100 million passengers carried per year, the position of leading European group for long-haul traffic, 1,1 tons of cargo transported and more than 2000 aircraft maintained for 200 airline customers. The company represents a profitable growth with 26,5 billion euros of revenues in 2018, knowing that the cargo activity is making more profit than the passenger transportation. Concerning the cargo activity, there is a total revenue growth of 6.4% in stable capacity. About the aeronautical maintenance, there is an order book increase continuing. The company has a large amount of buyers, 3,3 billions in 2013. In addition, for the full year of 2018 for Air France-KLM Group, there is a revenue growth of +5.0%, operating result at 1,332 million euros. There is an objective in the Air France company which is to increase collaboration across the Group to better capture synergies, efficiencies and economies of scale, with the aim of improving overall Group profitability. Market and customers In the European level, Air France has a lot of competitors as Lufthansa, Turkish Airlines, British Airways and so on, knowing that Turkish Airlines is one the biggest competitor of Air France. With this intense competition, it means that the market share growth is limited. There is a need of high capital and expertise required to enter the market of airplane manufacturers. There are a few numbers of suppliers, only Airbus and Boeing, and a high and unstable costs of inputs as the oil for example. A factor that is very relevant to increase competition, is the online booking websites, that allow consumers to compare and contrast tickets according to price, flight times and number of stops en route, and also, travel agents who assist customers in finding the best deal. Due to that, buyers’ power has increased marginally, and companies can no longer profit from ‘imperfect imformation’. Air France-KLM has many engagements which are important for the buyers and which contributes to the answer to their needs. Indeed, the company has the !

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sustainable development as commitment. Their strategy is built on four pillars which are the environment, the customer experience, human resources and local development. Since the main requirement of buyers is security, the group has commits highly with security and safety. To know what kind of competitive forces are industry members facing, we need to be interested by the forces model of competition, which are presented in the PowerPoint (slide 3). Innovation At Air France-KLM, innovation is everywhere and not just in a single department, which is why the group became successful. Air France is innovating a lot to stay one of the European leader with its digital factory opened in 2018. Indeed, the digital factory will welcome projects for different trades of the group. One of the project is LEA Loop that allows to be with the consumers as much as the company can in case of irregularity of the flight and then to improve their experience. The other project is called Turn Around 360, representing 25 operators from five different trades tested an application in real time during a simulation reproducing the conditions of a flight departure. Moreover, there is some more innovation as Spencer the robot, the development of electronic bag tags and tracking devices, the use of artificial intelligence to provide customer service channels and the Happy Flow biometric token trails. These are a few examples of the innovation of the Air FranceKLM group in the past years. To make sure French Tech gets off the ground, Air France has created a new concept bringing together start-ups and millions of passengers, keen on technologies and novel experiences. In October, Air France customers will be able to exclusively test the products and services of 10 French start-ups, spanning a wide range of fields. In what concerns innovation requirements for the aviation industry, driving forces are transforming the way we fly. Indeed, the industry is going to face a significant transformation and it will impact all the aspects of travelling from passengers to flight operations to cabin crew and even airspace management. These changes include the evolution of IT programs. The technology trend has evolved to become a way of operating. Airlines continue to invest in new technological systems to drive long-term savings and efficiency. Moreover, there is going to have a development of next-generation aircraft, new aircraft are more technologically advanced than their predecessors, and as aircraft have advanced so has the number of sensors and the capability to collect data. With the future growth of IP-enabled networks, the game changer for the aviation industry is to a real-time data made possible through IP-enabled networks. Real-time data allow airlines to drive operational efficiency such as optimizing flight routes, avoiding weather and turbulence events, driving predictive maintenance, and much more. !

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Possible outcomes and suggestions Competition could intensify for AirFrance. EasyJet opened its sixth French crew base in March. Ryanair, which had long avoided basing aircraft in France because of steep taxes and pro-union laws, is considering doing the same. Executives from IAG gathered at Orly Airport to celebrate the first French lowcost, long-haul brand it developed in-house. Air France-KLM has evaluated doing the same thing, with an even more stripped-down template than it used for Joon. 2017 was one of Air France’s most profitable, thanks to low fuel prices, a robust European economy, and earlier efficiency efforts. Celebrations were brief, however. In February a group of 10 unions representing pilots, flight attendants, and ground crew requested an immediate 6 percent pay increase, after years of frozen compensation, to reflect those results. When previous AirFrance CEO Janaillac refused, workers went on a series of rolling strikes: 15 days of walkouts over about three months, each forcing the cancellation of as many as a quarter of the airline’s scheduled flights. When trading opened the Monday after he resigned, Air France-KLM shares fell more than 14 percent, their steepest intraday drop in more than a decade. Even though, aviation executives and industry analysts tend to dismiss regulatory challenges as Air France’s principal issue. Unlike British Airways and Lufthansa, Air France has yet to make the adjustments required to bring operation costs down to what customers are willing to pay. Its salaries are comparable to those of other European airlines, but because of restrictive collective-bargaining agreements, pilots and cabin crew tend to fly less, and on a less flexible schedule. This means it costs Air France more to run the same number of flights than it costs Lufthansa and other competitors. As for KLM, the Dutch unit can fly the same passenger more profitably via Amsterdam than Air France can via Paris. KLM’s operating margin in 2017 was 8.8 percent, whereas AirFrance was 3.7 percent. The percentage of scheduled connections via the French capital is now about 58 percent, down from 63 percent at the time of the merger. The group has 80 partners and 2.5 billion euros of partners on AFKLM operated flights. Air France needs to maintain a global presence with alliances : the goal is to extend and optimize network and developing commercial position with local partners. Air France has 2 kinds of consumers : rich people for business, and middle range people using planes sometimes only for holidays. Now, they have a new target : young people. In addition to Air France’s competitors in the european level, that can be seen in slide 4, there is a strong local competitor : SNCF, which plan to merge Eurostar and Thalys to increase the European presence. It’s called the « Greenspeed project ». The goal is to create a company to serve Paris-Amsterdam-Brussels-London-Cologne with prices that will challenge those of Air France and low cost companies. !

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In 2019, was born a social movement from Sweden : FLYGSKAM. It’s a flight-shaming environmental movement, which means that taking the plane is a shame, because of the environmental consequences. Many people decided not to take the plane anymore and follow this movement. On September 2019, Air France decided to reduce even more the pollution since January 2020, in reaction of this movement. They have already new generation planes using 20-25% less of oil. So that between 2011 and 2018, they reduced 20% of CO2 emission. Now, they decided to remove all plastics for single use we can find on the planes. Moreover, they plan to finance a forestation project by investing millions of euros.

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