O'Leary; Air France-KLM the next Alitalia

[NoCtot]

I'm well aware comments from Michael O’Leary generally have to be taken with a massive pinch of salt. However recent comments regarding Air France-KLM did make me wonder.

Looking at the financial reports of the company over the last few years it seems their profit are falling massively behind their competitors while last years profit was largely contributed to selling off the silverware. Not surprisingly since their direct legacy competitors IAG and Lufthansa went through a massive reorganisation over the last few years as a result of increased pressures from the Middle Eastern carriers and Ryanair/easyJet/Norwegian.

How much longer can the French and Dutch pilot unions frustrate the reorganisations required at Air France-KLM? And more importantly how much longer will the company be able to survive without reorganisation and (hidden) French/Dutch state subsidies?

Ryanair : Air France connaitra le même sort qu?Alitalia | Air Journal (/2017-06-19-ryanair-air-france-connaitra-le-meme-sort-qualitalia-5183533.html)
Ryanair chief executive Michael O'Leary has compared Air France’s situation to Alitalia’s, noting a similar issue with high employee levels and operating costs compared to passengers carried. He said Air France 'is sick and will probably be the next to go to the hospital'. Air France has 70,000 employees and carried 50 million passengers in 2016. In comparison, Ryanair employs 11,500 staff and carried over 106 million passengers in 2016.

[mik3bravo]

I feel a little back handed, behind closed doors bail out from the respective governments might be in order conviniently overlooked by the Brussels beurocrats!!!!!!!!!!!!!!!!!!

Legally a total minefield and such a clandestine approach that MO'L will forensically monitor very closely.

[inOban]

I'm sure the comparison would still be dramatic, but it would be fairer to compare passenger-km rather than just passengers. You also have to see what activities are outsourced by MOL, but are in house by AF-KLM.

[Una Due Tfc]

Also KLM are a healthy, profitable airline. Air France are the problem

[Andy_S]

Also KLM are a healthy, profitable airline.

You wonder what drove them into the arms of AF if that's the case.

[davidjohnson6]

Shortly before KLM decided to merge with Air France, they were in a somewhat awkward position. BA were being pig-headed over a possible merger, linking up with Lufthansa would have raised competition concerns, there was bad blood with Alitalia, Swiss was weak and KLM realised there would be room for just 3 global alliances rather than 4. Furthermore, KLM while fairly well run no longer had the critical mass to compete as a global network carrier against the larger European players

[racedo]

I'm sure the comparison would still be dramatic, but it would be fairer to compare passenger-km rather than just passengers. You also have to see what activities are outsourced by MOL, but are in house by AF-KLM.


Even outsourced there is not 70,000 people involved.

[Piltdown Man]

KLM are not that healthy, they are still somewhat bloated and every now and again the fat kid wins. There are a few too many office clowns running all sorts of weird and wonderful initiatives, too many lazy cabin crew flying once or twice a month, weird and wonderful restrictions that result in European cabin crew doing one or two sectors a day and frontline staff who are positively poisonous to everybody they come into contact with. But by comparison with AF they are a fit, lean fighting machine.

PM

[Mr A Tis]

I've received pretty good service on board KLM both short and longhaul. Also the service centre has been very responsive when I've needed help. However their "new" business class is very dated and is a world away from today's market leaders. There is also no way I fancy a 12 hour trip on a near 30 year old 747 Combi, when there are so many better alternatives out there.
As for AF- well there is no way in the world I would step onboard one of their aircraft. (personal choice- you might like them)
One wonders if KLM were not saddled with AF, they might actually have still been up there with the big boys.

[nguba]

KLM not merging with BA (as Willie Walsh has said himself) was without doubt one of the greatest missed opportunities in aviation.

[PAXboy]

I'd suggest that, if KLM were not with AF, they would be married to one of the other big teams but not alongside them. The rundown by davidjohnson6 shows that they had limited room.

[Hotel Tango]

too many lazy cabin crew flying once or twice a month

However their "new" business class is very dated and is a world away from today's market leaders.

There is also no way I fancy a 12 hour trip on a near 30 year old 747 Combi, when there are so many better alternatives out there.

It's quite interesting how we all have different perceptions about these kind of things.

I have never come across lazy KLM cabin crew.

I find KLM's Business Class more than adequate for the price I pay.

Flying on well maintained 30 year old B747 Combis (which I have done numerous times) doesn't bother me at all.

I believe the Combis are about to be phased out anyway aren't they?

[NoCtot]

KLM are not that healthy, they are still somewhat bloated and every now and again the fat kid wins. There are a few too many office clowns running all sorts of weird and wonderful initiatives, too many lazy cabin crew flying once or twice a month, weird and wonderful restrictions that result in European cabin crew doing one or two sectors a day and frontline staff who are positively poisonous to everybody they come into contact with. But by comparison with AF they are a fit, lean fighting machine.

PM

I would tend to agree and disagree at the same time. KLM are probably not as unhealthy as Air France however they are still far from healthy themselves.

Where Air France has sorted out most of their pilot inefficiency problems (working till 65 and reduced pension benefits nowadays) they are still struggling with the cabin crew and other staff.
KLM is completely the opposite and have sorted out most of their office and support staff but are heaving a cabin and pilot work force which are highly inefficient (still retiring at 56 and pretty much a final salary pension while doing around 700 flying hours on an annual basis)

KLM does however manage to fill their aircrafts resulting in a very good load factor. However, their costs (mainly crew costs) are so extraordinary high they only manage to make a small profit mainly due to the low fuel prices.

[Heathrow Harry]

"I'm well aware comments from Michael O’Leary generally have to be taken with a massive pinch of salt."

I'd say he has been a damn sight more accurate over the last 20 years than any other airline CEO - sure he likes to generate headlines and he really irritates people but he's done extremely well whereas most of the others..... haven't

[dboy]

I don't like MOL at all, BUT, the man has a clear vision. So he might be right. Especially with
AF, it is still one of the best paid salary job. But the question is how long it is sustainable. The only reason why it is still like this is because of the strong unions and very protective market.

[azzbo]

I use them frequently short-haul and find the cabins and crew really good, but as others have said longhaul I'll choose a better airline with a nicer product and newer aircraft rather than an ancient KLM one as it's often cheaper even though KLM via Schiphol is more convenient for me.

Maybe it's time for a demerger for AF-KLM?

[NoCtot]

Maybe it's time for a demerger for AF-KLM?

Air France-KLM's future threatened by mutual distrust: Report | NL Times (http://nltimes.nl/2017/07/19/air-france-klms-future-threatened-mutual-distrust-report)


But then the reason KLM had to merge was they wouldn't survive on their own.

[Skipness One Echo]

But then the reason KLM had to merge was they wouldn't survive on their own.
I know that was the rationale but the real reason was that opportunities for growth would be constrained, I very much doubt rational minds thought actual survival was as stake. We too often talk in hyperbole to get our own way, it allowed the sale to proceed but I don't buy it.