Rising to the growth challenge

By Alexandre de Juniac Chairman and Chief Executive Officer of the Air France-KLM Group.
The airline industry: a dynamic market offering high-growth opportunities for Air France-KLM

We are fortunate to operate in a growth market: air traffic between Europe and the rest of the world is set to grow by an annual 4% over the next 15 years. Some of our activities already enable us to capture part of this growth: our Maintenance, Repair & Overhaul business, which benefits from growing engineering and maintenance needs, and the development of Transavia driven by the increase in leisure customer demand for flights offering the best value for money. Our other businesses are also preparing to capture this growth, by adapting to satisfy the needs of new customers, new requirements and new players. A few examples? New customers: the emerging Chinese, Indian and Brazilian middle classes are increasingly taking flights for holidays or to visit friends and family.

New requirements: digital is currently revolutionizing relationships with customers and distribution channels while the success of SkyPriority shows that we need to adopt a holistic approach to the customer experience – before, during and after the flight.

New players: in Europe, the low-cost airlines are reinforcing their positioning, particularly at our Paris and Amsterdam hubs while,to the east, the Gulf State carriers are developing rapidly. In short, we can’t go looking for tomorrow’s growth with yesterday’s strategies but we can adapt so that all our businesses are able to benefit from the dynamism of the market.

Our strategy can be summed up in one phrase: go looking for growth where it exists. The air transport market is a world of rapidly-developing giants where there will be no place for second division players. Clearly, growth creates size and size favors growth. Air France-KLM’s ambition is to reinforce its position as a world major with European foundations. This ambition informs our raison d’être: bring Europe closer, carry the world to Europe and welcome the world in Europe.

We have identified three main growth levers: Asia where we plan to reinforce our existing partnerships and develop new ones with airlines which are similar to us in size, the European leisure market where we are going to accelerate Transavia’s growth, and the maintenance market where we plan to continue to make acquisitions to supplement our organic growth.

However, to finance our growth, we are going to have to further improve our competitiveness and reduce our cost differentials with our main competitors. While the Transform 2015 plan enabled us to begin to narrow the gap, the competitive (low-cost carriers in Europe, Gulf State carriers to the east) and economic pressures (weak unit revenues) are such that we are going to have to maintain and intensify our efforts. This is why we are implementing the new Perform 2020 plan. All Air France-KLM employees are mobilized around building this plan and they will be responsible for its realization. It will mean unleashing everyone’s initiative, creativity and expertise so that we can regain our leadership position.

This plan will enable us to act on the main levers that will forge our future performance: Competitiveness: improving our operational performance and reducing costs. More than one million euros of savings will thus be achieved over the next three years. Customer focus: we have ring-fenced our investment in upgrading the customer experience (lounges, seats, in-flight entertainment, catering on the ground and in the air, digital) and we are going to continue to develop our relationships with all our customers everywhere in the world.

Change the way we work: we are going to take a fresh look at the way we are organized to optimize processes and become even more efficient, agile and responsive. This plan is going to succeed because we already benefit from multiple strengths to support our transformation efforts: innovation, openness, a fighting spirit, close customer relationships and reliability are at the heart of our corporate culture and history.

Our portfolio of brands (Air France, KLM Royal Dutch Airlines, HOP!, Transavia, AFI KLM E&M, Air France-KLM Martinair Cargo, Servair) enables us to respond to all the market needs with offers that are both well-positioned and mutually complementary. Our international network, which we are continuing to consolidate, remains one of the best in the world. Our alliances, both existing and future, contribute to our global reach. We are going to succeed with this plan because the men and women of Air France-KLM are all committed to a single goal: increasing standards of customer service day after day.