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Air France Stuggles with Low-Cost Airline

Wednesday 03 February 2016

Transavia, the low-cost subsidiary of Air France, has reported a €40 million loss for 2015, double those of 2014, with more bad news forecast for this year.

As we have reported previously in our Newsletter, Air France have placed Transavia at the heart of their plans for the growth of their business in Europe.

It is a market in which they are being eclipsed by other low-cost airlines, notably Ryanair and Easyjet, both of whom continue to expand their activities in France, on both domestic routes and short-haul destinations in Europe.

Last month, Ryanair added Toulouse to the list of bases from where it flies in France, and the airline also has plans to fly out of Paris Orly. Similarly, Easyjet last year also added Lyon and Paris Charles de Gaulle to its French portfolio.

As a result, the parent airline Air France is desperately trying to pull their brand out of operations in Europe to focus on long-haul traffic and to leave the way for Transavia to take the fight to its competitors.

However, the board clearly failed to reckon with the opposition of the pilots and cabin crew, who have been unwilling to accept any significant changes to their terms of service.

Last September, in protest against the Transavia plans, Air France pilots took part in the longest strike in the history of the company, causing huge disruption.

The resistance to change by staff has not been the only handicap the airline has experienced, for a great deal of the planned growth of the airline was into tourism travel destinations that have been badly hit by terrorist bombings and shootings, such as Tunisia and Egypt.

The airline has also attempted to take head-on other low-cost competitors on routes already served by them, on which only aggressive pricing has been possible.

Most of the Transavia flights operate out of Paris Orly, to destinations in the sun, but there are also flights departing from Toulouse, Nantes, Lille and Lyon.

Were it not for the resistance by airline staff the number of flights from regional destinations and other bases in Europe would be substantially larger, as would the aircraft fleet.

Without greater economies of scale the airline is unable to make significant economies in its operating costs.

Air France are forecasting losses in Transavia of €30 million in 2016, down on last year, but mainly due to the fall in the price of oil.

The board of the main airline have stated their objective is to end the bankrolling of their troubled sibling by the end of 2017.

Apart from a meagre €1 million profit made in 2012, Transavia has never reported a surplus since it was created in 2007.

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