Jean-Marc Janaillac, CEO of Air France-KLM, tells Graham Newton that the airline is ready to do battle to secure its position on the global stage
Are you happy with the airline’s performance, financially and operationally?
I am proud of what we have achieved over the last 18 months or so. Since the start of 2017, our traffic has been up and our unit revenue is increasing. We had a good summer with a high load factor.
A lot of this is to do with the success of the upmarket strategy implemented by Alexandre de Juniac, the continuing focus on the quality of service, and the performance of our revenue management and commercial policies.
Joon is a new model of airline, between a traditional and low-cost airline
There is still a lot of work to do. We will go on the offensive in our network with new routes and, as has been widely reported, we have a new airline, a subsidiary of Air France, Joon, to launch. Work to refine our processes and lower our unit cost is ongoing.
That is important not only for profitability but also for simplifying the organization to make it more agile to handle changes in the market.
How will Joon help?
Joon is an exciting development. It is a challenge to launch an airline but the goal is to allow the Air France-KLM group to win back market share, especially in the long-haul sector.
Joon’s cost structure is completely different.
Unit cost will be 15% lower on medium haul and 18% lower on long haul compared with Air France.
Joon is a new model of airline, between a traditional and low-cost airline, a new travel experience for all customers.
It will propose a fundamentally different travel experience with standards comparable to Air France and inspired by growing trends among a new generation
We will definitely be attracting new customers and Joon will integrate well within the Air France Group’s airlines portfolio.
What is the strategy behind the new deals with Delta, China Eastern and Virgin Atlantic?
The basic idea of these agreements is to grow in the long-haul market through commercial partnership, as defined in our strategic project, Trust Together. The strategy is a global one and allows us to link North America with Europe and Asia.
The partnerships also provide additional resources, freeing up the potential for Air France-KLM to finance investment and reduce debt.
The deal with Virgin Atlantic gives us a top-two spot in three of the four main North European hubs
With Delta, it was necessary to revise the deal as the existing joint venture (JV) only had three years to run.
The North Atlantic is obviously a vital market and so we have a new 15-year agreement.
Delta is also involved with Virgin Atlantic and it was clear that we were losing out on synergies by not combining that partnership with our JV with Delta. So, it made sense to tie up with Virgin Atlantic too, taking a 31% stake in their capital.
We have a fully integrated offering on the North Atlantic and a 25% combined market share.
The deal with Virgin Atlantic gives us a top-two spot in three of the four main North European hubs. That is a really strong footprint with the potential for growth.
China Eastern is also an important strategic move as China is obviously a huge market that is growing fast.
Already, it is the second biggest market for us outside of domestic markets and after the United States.
China Eastern was an ideal partner as it has a great network and is benefitting from the developments and growth in Shanghai. We also have joint ventures with China Southern and Xiamen Airlines.
How do you see consolidation?
Consolidation can take many forms. For example, domestically in the United States, it is possible to have total integration.
Consolidation is a way forward for the industry as it allows airlines to make improvements on several levels
And while we were the first to take the step toward consolidation in Europe with the Air France-KLM merger in 2004, it wasn’t possible to do it as US carriers have done it for a number of reasons.
Although we have integrated a number of crucial areas, such as revenue management, we maintain two airlines, each with their operations, brands, and service proposition.
But, generally, consolidation is a way forward for the industry as it allows airlines to make improvements on several levels. Most importantly, the offer to the customer is enhanced.
Are you happy with the infrastructure at your main hubs in Amsterdam and Paris?
Amsterdam Schiphol (AMS) and Paris Charles de Gaulle (CDG) are very important to the development of Air France-KLM.
It is vital that there is sufficient capacity for the airline to grow. At Amsterdam, this is something to be worked on moving forward.
Customer satisfaction is up and we are improving passenger facilitation
Costs are the subject of discussion at both airports, especially CDG.
There are good relationships though and we are working together to improve operations and connectivity. We are already seeing some results. Customer satisfaction is up and we are improving passenger facilitation.
What will Brexit mean for European aviation?
Air France-KLM’s position is clear. We very much regret the Brexit decision and feel it could have enormous implications for European aviation depending on the solution. Our position is clear.
We are happy to have UK carriers enjoying continued access to the single European market providing they abide by the same set of laws as those applying to EU carriers. I am confident that there will be a sensible solution.
So far, there haven’t been any effects from Brexit on our activity, although the sterling-euro exchange rate has adjusted.
How should European aviation policy develop? What are the key issues in your view?
European leaders have to realize that aviation is central to their citizens and their businesses. Airlines ensure European cohesion and support the role of Europe in the world.
There are three areas to address. The first is the global competitiveness of European airlines. At the moment, aviation in the region is fragmented and there are high costs.
Since the start of 2017, our traffic has been up and our unit revenue is increasing
It’s difficult to be competitive with other global carriers and European airlines are at an unnecessary disadvantage.
Second, we have to reduce airport and ATC costs. They are among the highest in the world and smarter regulation is essential to improve the competitive environment.
Third, there has got to be a level playing field for all airlines from all regions when flying to, from and within Europe. Different States subsidize their national carriers and the playing field is far from level right now.
I am proud of what we have achieved over the last 18 months or so.
Since the start of 2017, our traffic has been up and our unit revenue is increasing. We had a good summer with a high load factor
French air traffic control strikes continue to affect European aviation. How does Air France-KLM cope and what can be done to end the strikes?
It’s true that we have to confront this problem regularly. And it’s true that Air France pays a heavy price.
It’s not up to airlines to negotiate to end this problem but I think there has to be better advance notification.
If we know what is going to happen at least 72 hours in advance then it would possible for airlines to prepare and at least minimize the delays.
Moreover, we are getting better at ensuring passengers get to their destination on time. Our business continuity efforts are improving all the time.
Can we achieve good security and a good passenger experience?
Security has to be the priority here. We must do everything we can to guarantee passenger safety.
But there has to be as much of a balance as possible.
Looking ahead, the authorities need to invest in new technologies and redefine processes
Airports were very busy this summer and it was hard work to get passengers through the immigration checkpoints as new European controls were put in place. But we managed it. We asked for more staff on the checkpoints and we got it.
Looking ahead, the authorities need to invest in new technologies, redefine processes that are sometimes too rigid, and keep on increasing staff levels.
If the right measures are taken then balance is possible. Smart Security and its innovative technologies will be key.
Will the Carbon Offset Reduction Scheme for International Aviation (CORSIA) settle the environmental question or can the industry do more?
The environment is a vital issue for aviation’s sustainable growth. At Air France-KLM, it is taken very seriously.
And as an industry there has been huge progress over the years. Aviation was the first sector to organize itself on the global level to tackle environmental concerns.
But we can always do more. Airlines must keep working with their partners to reduce fuel consumption and implement digital solutions that help in many areas. Also, it is the duty of every airline to push for the right regulatory framework for biofuels.
CORSIA will be an important development but it must be remembered that European airlines also have the European Emissions Trading Scheme with which to contend.
Airlines cannot be subject to different schemes.
We will definitely be attracting new customers and Joon will integrate well within the Air France Group’s airlines portfolio
Is the industry innovative enough and what new technologies excite you the most?
The industry is certainly innovative enough. Look at the new aircraft, biofuels, and the improvements in the customer experience.
Personalized services are getting better all the time. KLM was the first airline to sell through WhatsApp
Airlines are developing solutions with big data and artificial intelligence and are heavily involved in social media.
Personalized services are getting better all the time. For example, KLM was the first airline to sell through WhatsApp.
Behind-the-scenes developments are really exciting too. Air France-KLM developed a forecast tool that allows us to optimize aircraft usage by making the maintenance process more efficient.
It is a major step that improves productivity and reduces costs.
Where should IATA focus its efforts to help the industry?
It is crucial to convince governments of the importance of aviation and the need for the right framework for global competition.
IATA also needs to keep focusing on standardization and simplifying the business so that processes and technologies are implemented in the smartest possible way. This is especially important in passenger facilitation areas.
Last but not least, IATA must anticipate. It is time to reflect on the future of the industry. Exactly how will environmental policies or airport capacity affect us?