Air France hopes its new low-cost business will enable it to better compete in attracting a new market of passengers in the millennial’s segment, an area it believes it will be able to carve out its own business proposition without cannibalising its own operations at its Charles De Gaulle Airport hub in Paris.
The new venture, currently known by the project name ‘Boost’ is set to launch before the end of this year and operate a fleet of 28 aircraft by summer 2020. It will initially take-off on medium-haul routes with a fleet of six Airbus A321s from winter 2017, growing to 11 units in summer 2018 when three or four A340-300s will also join the fleet for long-haul routes. The A321 will be supported by a six aircraft A320 fleet from winter 2018 with A350s joining the long-haul fleet from winter 2019 and replacing the older A340s by summer 2021 when the fleet will consist of six A320s, 12 A321s and ten A350s.
Like the LEVEL operation within IAG, which currently sits on a commercial platform within Iberia to expedite its launch, the Boost operation will have a wet lease agreement with Air France and its cockpit crew will be exclusively Air France pilots, on Air France terms as part of an agreement with pilot unions SNPL and SPAF that covers its initial development stage. This will deliver cost savings excluding fuel of around 15% to 18% below the mainline operation, although the higher-end of the scale will likely only be achievable once the modern A350s arrive.
Air France hopes that the start-up brand will help it regain market share, particularly from Gulf airlines, on loss making ‘ultra-competitive routes’ that combine both business and leisure flows. Its medium-haul routes will attempt to deliver profitable feed on routes that are currently struggling via its mainline operation, while its long-haul activity will mainly focus on Asian routes where flows have been impacted by the one-stop strategies of the Gulf airlines.
Although details of the proposed routes have not been revealed, Air France says that around 70% will cover current loss-making flights and destinations no longer served by the national carrier, while 30% will likely encompass brand new markets for the business.
“Competition from Gulf carriers is so fierce that it is really hampering our profitability level,” says Jean-Michel Mathieu, head of the Boost project at Air France. “It occurred to us that trying to recover the profitability on these routes through a cost reduction plan within the Air France mainline seems rather unrealistic. That’s why we think the creation of a new entity with a significantly lower cost structure is the only way to sustain our presence on these markets.”