Sick airline returns to the rudest of health As its European rivals cut passenger capacity, once-ailing Air France is boldly pursuing the opposite strategy
The forest of construction cranes towering over the foundations of yet another new terminal building at Paris Charles de Gaulle airport bears eloquent testimony to the rising challenge posed by Air France to its rivals around Europe.
The rejuvenated French flagcarrier is exploiting to the full the opportunities offered by the development of Charles de Gaulle to build the most efficient aviation hub in Europe.
At the same time it is developing a promising global airline alliance through its growing co-operation with Delta Air Lines of the US in SkyTeam; it is strengthening its grip on the domestic French market through the acquisition and merger of several local carriers; and it is seeking new business opportunities in airline-related activities such as aircraft maintenance, repair and overhaul, and catering.
“We are developing a vacuum cleaner sucking in high-yield passengers”
Pierre-Henri Gourgeon
While rivals such as British Airways and KLM are cutting capacity to try to bolster falling profitability, Air France is demonstrating that it is possible, even in the airline industry, to expand operations and increase profits at the same time.
Under the leadership of Jean-Cyril Spinetta, a member of the French civil service elite who took over the chairmanship of Air France in late 1997, the airline is building determinedly on the good fortune of its home base. Group net income rose by 5.2 per cent, to E461m (£287m), in the nine months from April to December last year on a 20.2 per cent increase in turnover, to E9.3bn.
The starting point for the transformation of the group from one of the sick men of Europe, dependent on a large tranche of state aid in the first half of the 1990s, to Europe’s fastest-growing network airline, was the development of Paris Charles de Gaulle.
Air France was late to grasp the importance of hubs. But since being helped in the mid-1990s by consultancy advice from Stephen Wolf and Rakesh Gangwal, two veteran US airline executives, the French carrier has built a hub that is the envy of its European rivals.
And there is more to come. A fourth runway is due to begin operation at Charles de Gaulle in June and the next terminal building, 2E, which Air France will take over in two stages during 2003-04, will create capacity for another 10m passengers a year.
The French carrier is already able to offer European air passengers more timely connections than any of its competitors. In the schedules for this summer, Air France has more than 15,000 weekly connections within two hours at Charles de Gaulle compared with 9,070 offered by Lufthansa at Frankfurt, 6,368 by KLM at Amsterdam Schiphol and only 4,567 by BA at London Heathrow.
“We are developing a vacuum cleaner sucking in high-yield passengers,” says Pierre-Henri Gourgeon, Air France’s chief operating officer. “Ten years ago the best way to go to Rio, Tokyo or the US was through Heathrow or Amsterdam, five years ago it would have been through Frankfurt. Now it is through Charles de Gaulle.”
The addition of the airport’s third runway in mid-1999 meant that it was able to increase the volume of peak-hour aircraft movements from about 80 to between 95 and 100. This will rise to 120 when the fourth runway is fully operational. By contrast, Heathrow, with just two runways and little prospect of any more, has a peak-hour capacity of about 85 movements.
The change is having a big impact on Air France’s competitiveness. It has been able to structure its operations at Charles de Gaulle into six successive “waves” of arrivals and departures. This reduces connection times and boosts the attractiveness of its hub for transfer passengers.
Mr Gourgeon says shorter connection times are the secret of bringing Air France flights to the top of travel agents’ computer screens. “Travel agents sell 80 per cent of their flights from the first page on their screens. If the connecting time is short enough, you get to the top of the
