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Air France creates lower-cost airline to better compete

Associated Press Associated Press 3/11/2016

PARIS — Air France announced plans Thursday to create a lower-cost version of itself, in hopes of better competing with Mideast carriers and low-cost rivals.

The new airline has no name yet, and it's not clear which destinations it would serve. But the plan is a sign that new CEO Jean-Marc Janaillac is determined to claw back market share after years of painful job losses and restructuring.

Parent company Air France-KLM said in a statement Thursday that the new airline would focus on long-distance routes that it sees as strategically important — but where Air France is currently struggling against cheaper competition.

It said the airline would offer economy and business travel and start flights in late 2017 from its hub at Paris' Charles de Gaulle airport.

It would use Air France pilots who volunteer to work under new rules "adapted to its competitive position," while cabin crew would be recruited under a new system "allowing this company to operate at the level of market costs," the statement said. The company will save money on ground staff by relying increasingly on digitalization, it said.

French employers face among the world's highest labor costs, and Air France staff have gone on strike repeatedly to protest job cuts and other cost-cutting in recent years.

Janaillac presented the plan Thursday to the Air France works council. "We are battling on all fronts," he said in a statement. "The status quo is not an option."

Christophe Pillet of the SNPNC cabin crew union expressed concern that the new airline's staff wouldn't have the same labor benefits, and that the new company could eventually "supplant" Air France.

"The new company will not really be low-cost for customers, because they will find the classic fee conditions in different classes that they already see at Air France. However it will be low-cost for the cabin crew," he said on Europe-1 radio.

Janaillac insisted the new company would represent a small part of Air France-KLM's activity.

In quarterly results Thursday, Air France-KLM noted a "highly uncertain" global context and "special concern about France as a destination" as tourism has slumped after deadly extremist attacks.

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