Air France KLM Corporate Strategy
The Strategic Position of Air France
The passenger travels happens to be Air France KLM major operations and subsequently the main source of revenue. The passenger business operation contributes to 80 % of the groups revenues. Air France and KLM conducts regular market surveys in identifying what can be referred to as the profiles of various categories of travelers, which the airlines carry to their various destinations. The survey findings assist the company in formulating commercial and strategic positions. The networks of Air France KLM are placed at the client’s disposal. It relies on a dual system that is structured around the hubs at Paris-Charles-de-Gaulle and Amsterdam. The dual network system also allows the corporation to offer more than 200 weekly flights in more than 25 destinations across the Asian Pacific (Air France, 2012, p1)
Another aspect is the fare combination, which allows the clients to decide their journeys with air France via Paris and in KLM via Amsterdam by merely adding up the one-way fares to and from the destinations. This strategy of flight connections is mostly beneficial to customers from either the hub on the inbound or outbound legs, therefore gaining more access to the most economical fares so far. The flight timings of Air France KLM are specifically paced throughout the day with 50 code-shared flights on a daily basis. This increases the potential of flights from and to the Asian pacific and also other parts of the world through either, Amsterdam-Schiphol or Paris- CDG2. This translates that Air France KLM is capable of offering its clients an attractive link between the two cities with a compounded capacity of more than 4, 500 seats daily in both destinations (World Airlines, P56).
In an attempt to satisfy the demand for simplicity, autonomy, transparency and legibility typical expressed by the group’s customers, the group has embraced the use of the latest technologies in its operations. In particular, there was the mainstream electronic ticketing, extended check in at kiosks designed for customer self-service or using the website of both airlines. The e-services have proved to be more favorable with passengers. For instance during the year of 2005 and 2006, a good percentage of passengers at Air France KLM travelled with an electronic ticket. The development of e-services provided genuine opportunities to the group in cutting down the costs while at the same time, improving the quality of services in meeting customer satisfaction (Progress, 2010)
Air France KLM has apparently availed electronic ticketing in approximately 98% of its France destinations. This forms part of the group’s policy in sustainability in cutting down expenses. Combined with the self-service kiosk check in or the internet, the electronic ticketing system has become a crucial e-service component in the firm. The system eliminates paper work type of ticketing, and stress sources that are typically generated when a passenger loses or forgets his or her tickets. The electronic tickets are usually accessible during the time of booking on the group’s websites either through the ticket office or by telephone. The airline offers travelers two choices when checking in on their flights. This saves the passengers’ precious time by avoiding the long queues usually experienced at many airports. The two choices offered include the internet check in and the self-service kiosks (Air France, 2013, p16)
The group’s client’s uses the self-service kiosks with internet access in checking their flights when they arrive at the airport. The travelers simply insert either their credit or flying blue card into the machine, which identifies their membership names or number and searches their e-ticket. This process takes approximately 30 seconds and is normally conducted within five hours before the actual flight. In the year 2003, Air France introduced the l’Espace Première cabin to enhance its services. In an elegant and refined setting, travelers can now enjoy the exemplary services offered by the group as each traveler is accorded special attention as well as the discreet services. Within the aircraft, travelers enjoy the private lounge environment and seats adapting to their needs, with enough room t interact with another passenger and positions acting as lie-beds. (Air France KLM, 2013, P1)
Air France KLM Business Model
Air France-KLM corporate financial report, strategy and SWOT provides an extensive information and data with regard to the company operations. The report summarizes the organization’s operations, structure, SWOT analysis, financial details, services offered and corporate actions providing the entire view of the organization. Air France KLM popularly Known as the “group” provides both passenger and cargo transportation services across its destination in the world. In addition, the group offers industrial maintenance services and the related services such as charter and catering services. Its services are based in USA, Africa, Middle East, Europe and Asia. The groups headquarter is placed at Paris, France. It is an employer of approximately 110, 015 workers as at 2012. During the fiscal year of 2012, the company recorded revenues amounting to E23, 615 million. This was an increase of 12.5% over FY2011. The group’s operating profit stood at E122 million during its 2012 financial year. This contrasts to the E1, 285 million operating loss accumulated in the previous year (2011). The net profit amounted to E613 during the financial year in 2012 again, contrasting the net loss of E1, 559 million accumulated in the previous year (Marketline, 2013).
The group initiated a new strategy in giving no frill carriers a run for their money while at the same time trying to regain the lost market share to its rivals of lower costs. The new business model devised by the company includes deploying a new Airbus A320s to various regions on point on point, short and medium-haul routes. Meanwhile Air France KLM intends to add to the capacity of its seats in establishing regular destinations that are non-stop. Some of these destinations are in areas such as Toulouse, Bordeaux, Marseille, and other major cities in the Mediterranean and Europe. The groups have also increased the capacity of its domestic destinations. In all these flights, travelers are poised to benefit from the “free” AF services offered by the company on its network of medium haul including apiece of checked baggage, seat choice, a choice of their favorite newspapers and payment by credit card at no added cost (Buyck, 2011, p1). All the groups’ employees are incorporated within this project and other decision-making programs. In addition, Air France KLM intends to develop what is referred as a virtuous cycle that is poised to make its medium haul operations more profitable as well as growth. According to Air France KLM chief executive officer, Pierre-Henri Gourgeon, this is the foundation of Air Frances strategy. The company will also initiate 13 non-regular destinations to increase its capacity to more than 50%. The new routes will include Casablanca, Istanbul, Basel Mulhouse, Beirut, Athens, Brest, Prague, Eindhoven, Moscow, Copenhagen, and Dusseldorf.
The group’s cargo department is considered as one of the largest in not only the Europe but also the world market, excluding integrators. The airlines market share amounted to 30.6% in 2011 perspective among the association of European Airlines. At the global level, the market share stood at 7.0% during the same year. The market share trends for this corporation reveal that, the company is very much committed in prioritizing developments and improvements in unity revenues and putting more emphasis on profitable destinations (Air France KLM, 2012). Against the backdrop of declining global markets and while the airlines cargo sector posted dismal performance, the combi and belly business model employed by the company stirred a positive contribution to the corporation.
The acquisition of equity interest amounting to 25% in Alitalia has mandated Air France KLM to step up its cooperation initiative with the Italian Airline and stir up its own presence in the Italian market sphere, which is considered to be the fourth in Europe. The company is responsible for the revenue management, marketing and supervision of cargo operations in Alitalia. Additionally, the joint venture agreement signed between Delta and Air France-KLM back in 2009 has mandated the three Airlines to cover approximately 27% of the total offers in Trans Atlantic region. This is more of reflected in a closer coordination of the commercial regulations facilitated by the granting antitrust immunity. The group’s collaboration with the Kenya Airways was enhanced through the joint ventures framework between Amsterdam, Nairobi and CDG through a project referred as the “safari project” (Air France KLM, 2012, P2).
Air France KLM Current and Future Strategies
Business integration in the airline market in European perspective is long overdue. This owes to existence of many airline companies in this overcrowded industry. The group has initiated partnership plans with such companies as CO and NW. Once this plan succeeds, a gradual shift of traffic will significantly be felt. The Continental and Northwest passengers will be able to transfer on a full code share ticket through CDG. In general, the business collaboration is expected to drain majority of the crucial traffic which connects at Amsterdam and that takes the group across the group across the Atlantic sphere in getting to Amsterdam. If that succeeds, it then becomes obvious that the management committee at Amsterdam is proved unsustainable. Without having done much, Air France KLM will have achieved its mission of its connecting traffic as well as increasing its Trans Atlantic. (Ladevale, 1969, p12). Air France KLM mission is to become the leader in European airline market sphere. In achieving this aspect, the group aspires to collaborate with other regional and international airlines and partners.
According to Alexandre de Juniac, the CEO of Air France, the group has a two-way ambition in its business plans. This includes repositioning its products and services at the best possible international level while at the same time improving its leisure offering. The second ambition is on restoring its competitive edge. In the various stages of its strategic processes, Air France KLM has decided to be transparent and privileging social dialogue in finding structural and sustainable solutions, which are incorporated in the corporate agreements. At the end of this year, Air France KLM is expected to present new agreement framework for signing by various corporations. If these framework of agreements are signed the group has vowed not make any redundancies and implementing various measures aimed at supporting the necessary reduction in employees. This project is part of the plan of Air France KLM recovery project where the two airlines are implementing measures aimed at transformation and ensuring a rapid return o the group’s breakeven (Ladevale, 1969, p24).
In trying to regain its competitive edge in the airline market, the group’s short and medium haul operations have been restructured around three complimentary poles including Transvia, France and the Air France a French regional hub. The company will go on with its plans of development by feeding one of its hub in Paris-Charles de Gaulle, one of its major European and domestic destinations from Paris-Orly and Paris-Charles de Gaulle as well as the three regional bases in Toulouse, Nic, Marseille. The partnerships and collaborations with the British Air, Airlinair, and regional airlines is expected to give rise to 20% of the cost reduction (Engle, 2009, p2) In addition it is poised to offer customers a broader range of services for leisure travelling and other airlines services across Europe. In capturing the development in the leisure sector, Air France KLM decided to develop its subsidiary Transavia France which is expected to increase the rate of its present flights and will open new destinations from Nantes, Lyon, Lille, and Paris-Orly. However, no destination of Air France KLM will be transferred to this subsidiary of Transavia France (Michaels, 2008, P1).
By making a difference with the quality of its services and products, more especially in business and first class, Air France is poised to achieve an increased growth momentum. If the agreement framework is signed by the responsible organizations, then the group’s investment programs which represent several millions of euros will boost the companies’ operations and subsequently the returns. In improving client channels at its hubs, Air France KLM has embraced the use of technologies as we noted earlier so as to provide a faster and easy to use travelers channels based at the new infrastructure. Some of this new infrastructure includes the S4 boarding satellite, which can be found at Paris-Charles de Gaulle (Oxford, 2012, p12). The economic efficiency of its stations will also be optimized by negotiating agreements on purchases, streamlining procedures and increasing production.
The procurement department at Air France KLM is committed to supporting the business endeavors in the effort of giving the group competitive edge. In the past, the sector has been noted to be emphasizing on quality, safety, value as well as the total ownership cost instead of the pricing alone. Since this strategy has worked well for the group, it is presumed that the same will be used even in future planning. The key drivers in the procurement strategy include creating synergies, establishing relationships with suppliers and reducing complexity (Air France KLM, 2013,P1)
Within the cargo department, the company will go on with its efforts initiated in the past three years of improving performance while at the same time reducing operational costs. The integration of KLM Cargo and Martinair will be considered after the exploration of the regional and international stations. For the purpose of maintenance operations, the company is expected to go with its strategy of growth, more especially in the development of its aircrafts engines, equipments and other tools. In addition, expectation to take effect is reorganizations of the industry so s to restore the profitability status of the aircraft maintenance section (Rahn, 2010, p5).
The group’s efforts in adapting the strategy of the long haul network, to the context of the new competitive market, as reflected in the network and its fleet, searching and finding the best way to increase production, targeted network development, leveraging partnerships, especially within the framework of joint partnership agreements with Delta as well as the ongoing investment programs in on board goods (Amstelveen, 2012, P1).
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