AF-KLM plans to fight its corner as competition grows fierce

RyanAir recently accepted Union representatives and recognised workers rights in the U.K. and EU. That was a significant move, that made the company look like it had become a little more worker friendly. It was really a strategic slight of hand to enable it to compete without argument from Unions in France especially, that it didn’t respect rights or work legally.

RyanAir is about to move into France in ways it hasn’t previously been able to do.

AirFrance-KLM has a major hold in the domestic French market, largely because its labour costs are high and legal rights exceed any other European country. It’s made it hard for low cost carriers to physically base themselves there until now.

AF-KLM is to give Transavia a 6.7% capacity increase inside France and is preparing its domestic services with HOP! (once known as Air France Régional), to be more flexible and produce capacity increases through better rostering. But there won’t be any new aircraft, the company can’t afford them.

Plans for Joon continue. The airline concept is effectively a way of subverting AirFrance’s costs in labour through new crew and contracts that cost less. That in turn should make routes AirFrance can’t make pay, actually viable. It’s not about competing in the long haul low cost market, which AirFrance management don’t feel has yet proved itself as genuinely profitable, as a business model in Europe.

Norwegian is eyed with suspicion because its losses are endless and it’s rare profits mostly down to low fuel prices which have now vanished. It reinforces the view that the long haul low cost arena is still too volatile for AF-KLM to risk.

What AirFrance worries most about is loosing its grip on the French market. Labour laws have kept genuine low cost operators mostly out, they operate but they don’t build bases. That’s about to change and RyanAir is about to announce some permanent bases in France that will seriously impact the flag carriers business. AF made it plain that it will be watching for any attempt by competitors to operate outside of the law.