Air France Plans Low Cost Carrier (LCC) Subsidiary

Air France (AF, Paris CDG) is considering setting up a low cost, long-haul subsidiary akin to Lufthansa’s Eurowings (EW, Dusseldorf) and Air Caraïbes Atlantique’s tentatively named SunLine project.

Air France

Air France, stylized as AIRFRANCE, is the French flag carrier headquartered in Tremblay-en-France,. It is a subsidiary of the Air France-KLM Group and a founding member of the SkyTeam global airline alliance.

The revelation comes after Air France’s Chairman and Chief Executive Officer, Frederic Gagey, revealed in July that only 50% of his airline’s long haul routes were currently profitable. Europe’s legacy carriers have blamed their waning long haul fortunes on the rise of the Gulf carriers -Emirates (EK, Dubai Int’l), Etihad Airways (EY, Abu Dhabi Int’l), Qatar Airways (QR, Doha Hamad Int’l) – as well as Turkish Airlines (TK, Istanbul Atatürk).

As such, Air France sources who spoke to France’s Les Echos newspaper on condition of anonymity said the proposed LCC project would achieve a lower-cost base as compared to its mainline operation by using an undisclosed number of Air France-KLM Royal Dutch Airlines’ twenty-five incoming B787-9s to ply its network. The aircraft’s improved fuel economy will help drive down overall operational costs.

In addition, flight and cabin crew would be recruited either on a voluntary basis from the mainline carrier and/or via external recruitment. This would also provide Air France with a placement option for mainline crew deemed surplus to requirements thus avoiding contentious layoffs, the sources said.

The project’s viability, however, is dependent on airline management reaching an agreement with its combative pilot corps over fleet scope as well as remuneration.

Last year, a 14 day-long pilot strike cost Air France an estimated EUR300 million in lost revenue following an impasse between the two sides over management’s plans to launch a new pan-European LCC subsidiary – Transavia Europe. Faced with a shrinking domestic and regional European market share, the move would have allowed Air France and partner KLM to begin competing with the likes of established LCCs Ryanair (FR, Dublin Int’l), easyJet (U2, London Luton) and Norwegian (DY, Oslo Gardermoen) which currently dominate the market.

A final decision on the proposed project is not expected before October.

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