Air France replicates low cost competition

Over the last few weeks, rumors and false information on a possible conversion of Air France-KLM short/medium-haul network into a low cost operation abounded so much that the management of the French national carrier decided to reveal a new strategy earlier than planned. On November 12th, Air France highlighted its new structure for its short- and medium-haul routes. On November 18th, Pierre Gourgeon, Air France-KLM Group CEO gave full details on the perspectives of the airline’s future offer.

“We have seen a slow erosion of our unit revenue since 2002 on short-and medium-haul routes. Despite the adjustments and changes that we have made in 2003/4 especially with more competitive fares, we continue to see our unit revenue plunging to levels unseen for over a decade. We had to react strongly,” explains Pierre Gourgeon.

Air France will reposition its product from April 2010. The product will be simplified into two new reservation segments: Premium and Voyageur. Premium will integrate both Business Class and Full-flexible economy fares and Voyageur will propose low fares in economy with little flexibility to change. Most importantly, Air France will lower its current fares by 5% to 20% for its lowest fares and by 19% to 29% for its most expensive tickets. “Premium will then give full flexibility and quick procedures for passengers. By contrary, Voyageur is conceived for savvy travelers, I am convinced that we will see a rapid turn-around as we will gain market shares again in Europe thanks to our low fares in both leisure and business travel segments” predicts Gourgeon.

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