Air France Outlines Next Stage of Regional Offensive

Air France has outlined its growth strategy from Nice and Toulouse from spring 2012 as it expands the regional offensive that was launched at Marseille earlier this year into two other markets. Bordeaux will be added as the fourth point of this project at some point later in 2012. The carrier has been discussing the revised business model over the past year, looking at offering point-to-point services from the regions to international markets, fighting to win back some of the market share it has lost to low-cost rivals over the last few years.

The airline launched its new base operation at Marseille in October 2011 and has already announced further expansion to its network for next year following its successful inauguration. According to the national carrier it has “shown very encouraging operational results”: It will now attempt to replicate this success in Nice and Toulouse, with significant growth particularly planned at the latter’s Blagnac Airport.

The French national carrier has come under increasing pressure in both the domestic French and intra-European markets. Over the past five years its share of the domestic market has slipped from 90.5 per cent to 80.7 per cent. Its main competitors have been easyJet which has grown from a 5.9 per cent share to 12.8 per cent of the traffic and Ryanair which now has a 3.2 per cent share.

It is the same when you look at the wider European market (including France). Five years ago Air France had a 45.9 per cent share of this market, a figure that fell to 38.5 per cent in the past 12 months. Again, it has been the low-cost carriers that have hit its traffic; easyJet and Ryanair have succeeded in diluting Air France’s traffic with growth of 6.9 per cent and 2.2 per cent respectively during that period.

This revised strategy is based on achieving a significant reduction in operational costs, of around 15 per cent, according to the carrier. This will be achieved by using a single aircraft type (Airbus A320 with between 142 and 178 seats), optimising fuel consumption and rationalising maintenance costs; an optimised daily use of aircraft with departures earlier in the morning and return flights later in the evening as well as turnaround times reduced by five minutes at stations; cabin and flight crews based in the provinces; and optimised use of human and material resources on the ground throughout the day.

From April 1, Air France will more than double its network from Toulouse Blagnac by adding a further 16 destinations to a network that currently encompasses 12 points. These new routes will comprise five times weekly services to Brussels, Geneva, Hamburg, Prague; four flights per week to Athens, Berlin Brandenburg, Seville, Tunis and Vienna; three rotations a week to Casablanca, Istanbul, Malaga and Venice and twice weekly links to Malta, Marrakech, Naples. Together with its existing flights this will increase its network to over 430 weekly flights.

As the table above clearly illustrates, Air France has seen its share of the Toulouse market shrink significantly in the past five years as its own traffic has stagnated. From handling almost two thirds of the passengers in 2006 it had less than a 50 per cent share last year, coming under increasing competition as Spanish low-cost carrier Vueling Airlines opened its first overseas base in the French city.

Half of the new routes from Toulouse will be to destinations not currently served with just three placing Air France in direct competition with its low-cost rivals: Barcelona (Vueling Ailines), Geneva (easyJet Switzerland) and Venice (Vueling Airlines). However, easyJet will be adding its own flights to Brussels and Venice from March 27, 2012. Other routes it will face competition comprise Brussels (Brussels Airlines), Casablanca (Royal Air Maroc and Jet4you), Istanbul (Turkish Airlines), Marrakech (Royal Air Maroc and Jet4you), Seville (Air Nostrum for Iberia) and Tunis (Tunisair).

Meanwhile, a much smaller growth will take place from Nice with six new destinations to be added to the Air France network from April 3, 2012 increasing its total weekly schedule to 330 flights encompassing 22 destinations. These comprise three times weekly links to Athens, Barcelona, Istanbul, Tel Aviv and Venice and twice weekly services to Naples.

At Nice the loss of traffic from Air France is less profound. In the space of the last five years it has seen its share of traffic decline marginally from 34.2 per cent to 32.1 per cent. Meanwhile, during the same period easyJet’s has grown its own share marginally from 21.7 per cent to 22.0 per cent. Only two of Air France’s six new routes are presently flown by other operators with Air Nostrum and Spanair providing links to Barcelona and Turkish Airlines to Istanbul. However, significant growth from its rivals will see easyJet launch operations to Barcelona, Naples and Venice and Vueling Airlines add its Barcelona base to its network from Nice from the end of March 2012, just ahead of Air France’s own expansion.

Air France acknowledges that its challenges in its medium-haul network are “considerable” and that it seriously needs to work on strengthening its competiveness in these markets. Its new flights will attract business travellers many of whom would have previously had to connect via Paris to complete their journeys. But, attractive and competitive fares (versus its low-cost rivals) will mean stimulate leisure demand.