Air France-KLM (OTCMKTS:KLMR) Will Launch Low-Cost Airline For Long-Haul Routes

The Franco-Dutch airline business, Air France-KLM (OTCMKTS:KLMR) has announced a new airline that will serve Asia and the US or the long-haul routes.

It will be a low-cost airline to help the business compete better and win back customers from carriers of the Gulf countries. The competition has become very stiff in Europe in recent years, with carriers such as Ryanair and others becoming very popular. Many passengers have switched over to these no-frills airline businesses to save money. Air France has been losing their market share to competition. Clashes with trade unions have also compounded their problems.

Jean-Marc Janaillac, the new boss of Air France said while disclosing the plan that the business was “battling on all fronts”.

Air France Plans for the Next 3 Years

The new airline has not been named yet, but it will start flying to Asian cities at the end of 2017. But eventually, the aircrafts will cross the Atlantic to reach many American airports. Jean-Marc disclosed that it will fly on the least profitable routes of Air France, and will have both business and economy class. By 2020, Air France wants to have 10 long-haul planes.

To compete with others, the business will soon hire both cabin crew and pilots, but they will get lower salaries and fewer benefits. However, some of the current pilots of Air France will be transferred to the new business, and they will keep getting the same pay. Janaillac said, “The status quo is not an option. We must launch a new dynamic to return to a leadership position in our markets”.

The cabin crew union, however, has expressed their concern about the new airline staff not receiving the same benefits. Air France (OTCMKTS:KLMR) has a history of conflicts with unions. Protests with employees turned violent last year, as the shirt of one of their executives was ripped off.

Budget Airlines – The Way to Go

Many of the traditional big carriers, such as Deutsche Lufthansa AG, International Consolidated Airlines Group SA, and British Airways already have their short-haul budget services. The Air France service will be different, as the company wants to target medium to long-haul business, which is supposedly more profitable.

But it will not be the first transatlantic budget service. Norwegian Air Shuttle ASA operates discount flights between Europe and North America, including flights from France to Los Angeles and New York. There is Iceland’s WOW air and Canada’s WestJet Airlines as well that fly transatlantic flights at low costs.