Air France KLM Strategy

NGUYEN Kim - MARTOT Cédric - PALLIN Olivier

PIZZONI Nicolas - ZAPPULLA Damien

ESCT - Promo 2008 - DA

Introduction

I) Company profile

v Air France: Background

v KLM Royal Dutch Airline: Background

v Air France - KLM Group: `Highways To Success'

v Mission Statement

v Vision 2010

v SWOT

II) Successful merger through network management

v New Business Model (course network strategy)

v The merger becomes a necessity

v Results and next major challenges

III) Sky Team Alliance: «Miles» your flight

v Skyteam : Mile's your flight !

v Connecting strategy to relationship

IV) Air France - KLM: new leader of low cost airlines?

v Low cost traffic isn't marginal!

v Transavia: Air France-KLM strikes back (Netherlands low cost airline company)

Introduction

Few inventions have changed how people live and experience the world as deeply as the invention of the aircraft. During the both World Wars, government subsidies and demands for new aircrafts vastly improved techniques for designing and building them. Now, the industry has progressed to the point where it would be hard to think of life without air travel.

During dozen of years, the airline industry was either partly or wholly government owned. This is still true in many countries, but in Europe and in the United States, all major airlines are private. This major shift has definitely changed the situation on the market for both airlines and travelers.

If the airline industry could be described in three words, they would be `intensively competitive market'. In recent years, more and more airlines have appeared which has forced `historic' airlines to enhance their competitiveness. Thanks to this process of democratization, more people than ever before travel by airplane nowadays, and more airlines are starting to offer longer non-stop flights.

At the time of global warming, it appears that the air travel growth contributes significantly to climate change. Globally, the world's 16,000 commercial jet aircraft generate more than 600 million tones of carbon dioxide (CO₂), the world's major greenhouse gas, per year. Indeed, aviation generates nearly as much CO₂ annually as that from all human activities in Africa.

At the beginning of the century, it was about technical challenge. Then, at the turning point of the twenty-first century, the airline industry is facing the environmental challenge... the most critical challenge of the humanity. Nowadays, the sustainable development is not just a notion but a real objective.

To the people who see the possibilities,

And who, sometimes with courage, sometimes with faith and hope -

But always with effort, perseverance, and energy

(despite self-doubt) -

Strive to make the possible become reality.

Dreams can come true.

I) Company profile

Air France: Background

On 7 October 1933, five French airlines merged to become officially Air France. These airlines were Air Orient, Air Union, Société générale de transport aérien (formerly Farman), the CIDNA (formerly Franco-Roumaine) and Aéropostale.

1946-1960: Soaring High

At the end of the war, Air France renewed its fleet, became state-owned and introduced scheduled services to New-York. First hostesses were hired in 1946..

In 1948, an act of parliament created Compagnie Nationale Air France on June 1948. Air France became then a state-owned carrier. Max Hymans was appointed CEO of Air France. During 13 years, he implemented a policy to modernize the fleet with the introduction of state-of-the art jet aircraft.

On 12 November 1952, Air Inter was founded with the aim of «promoting a coherent network of domestic air routes».

1960-1970: The Jet Era

On 23 February 1960, the French government transferred Air France's domestic monopoly to Air Inter, compensated by a stake in Air Inter.

In 1963, Air France had to share routes with its private sector rivals. In fact, the French government decided the division based on a law. Under this act, Air France had to withdraw all services for many routes which were exclusively allocated to the newly formed Union de Transport Aérien (UTA).

1970-1990: Maturity

In 1976, Air France operated its inaugural supersonic transport (SST) service on the Paris Charles de Gaulle to Rio route.

By 1983, Air France was the fourth-largest scheduled passenger airline and the second-largest scheduled freight carrier in the world.

1990-2004: The Merger

Air France, UTA and Air Inter were merged into the new holding company, Air France Group. This second merger reflected the 1933 merger. The French government supported the creation of a national carrier to counter potential threats, resulting from the liberalisation of the EU's internal air transport market.

The Head Office was relocated to Roissy at the heart of its operations. This major change was mainly due to Stephen Wolf, a former United Airlines CEO, appointed as adviser to the Chairman, Christian Blanc. Despite this, Air France had to wait until 1997 to become again profitable.

In 1999, the status of Air France changed accordingly and the airline evolved from a national carrier to an Airline major.

In 2000, the SkyTeam global alliance was set up. SkyTeam offers one of the world's most extensive networks, with four strategically located hubs in Asia, the United States, Latin America and Europe.

On 5 may 2004, Air France and KLM tied the knot: two of Europe's oldest airlines which had both witnessed the dawn of international air transport.

2004-2007: Open Skies

On 17 October 2007, Air France and Delta Air Lines signed a joint venture agreement to share revenues and costs on their trans-Atlantic routes. By 2010, the agreement will be extended to all trans-Atlantic flights operated by Air France and Delta between Europe and the Mediterranean on one side and North America on the other side.