Preserving our strategic strengths
Networks, hubs and the alliance are all key to a strategy which is demonstrating its validity in the current environment.
A powerful, balanced network
The Air France-KLM group has the largest route network between Europe and the rest of the world. Of the 180 long-haul destinations served directly out of Europe, it offers some 111, providing two in every three passengers with a travel solution. The Group also offers 42 destinations which are not served by its competitors, thus bolstering the strength of its network.
Two coordinated hubs at developing airports
The Group's network is coordinated around the two intercontinental hubs of Roissy-Charles de Gaulle and Amsterdam-Schiphol, which are two of the four largest connecting platforms in Europe. Their efficiency is supplemented in southern Europe by the airports of Rome and Milan where Alitalia, the Group's strategic partner since January 2009, operates. Furthermore, these hubs, which combine connecting with point-to-point traffic, are organized around airport platforms whose development potential will further strengthen the role of the large intercontinental hubs. Between June 2007 and 2012, Air France will benefit from the gradual opening of new airport infrastructure which will provide state-of-the-art facilities for passengers and make Roissy-CDG a model of excellence in Europe. This large scale pooling of limited flows gives small markets world-wide access while optimizing the fleet and enabling the use of larger aircraft, which not only reduces cost, but also thereby noise and carbon emissions. For example , the second wave at the Roissy-Charles de Gaulle hub, organized around the arrival of 61 medium-haul flights and the departure of 28 long-haul flights, offers 1,797 possible combinations within a period of under two hours with only 89 aircraft.
SkyTeam, a global alliance that strengthens the network
Air France and KLM play a lead role in the SkyTeam alliance, the number two global alliance in terms of market share. Bringing together 13 European, American and Asian airlines at June 30, 2010, SkyTeam enables the Group to respond to market needs and withstand competition in both passenger and cargo transportation. SkyTeam welcomed two new members in June 2010, Vietnam Airlines and tarom. China Eastern will join the alliance in 2011.
Financial strengths
Air France-KLM enjoys a solid financial structure, a robust balance sheet and a comfortable cash position.
New measures to support the performance of the Group's activities
Adapting its strategy to withstand the crisis In order to rise to the new challenges presented by the global financial crisis, Air France-KLM has implemented measures aimed at:
- Adjusting its capacity to demand
- Adapting its unit costs to the reduction in capacity
- Curtailing its investment plan to preserve cash
- Leveraging its competitive advantages including the joint venture in the North Atlantic
Reinforcing the cost-savings plan
The Challenge 12 cost-savings plan has regularly been reinforced since the beginning of the crisis in 2008. For the 2009-10 financial year, the annual target of €600 million of savings was progressively increased to €700 million. For the 2010-11 financial year, the initial target of €420 million has been increased to €510 million plus an additional €200 to €250 million of savings linked to the adaptation of the cargo and passenger businesses.
Headcount adapted to the decline in activity
Since the summer of 2008, the Group has adapted its headcount to the decline in activity. The first measures were a freeze on hiring and temporary workers, assistance with retirement and an increase in professional and geographical mobility initiatives. This policy enabled a 2.5% reduction in the number of employees (full time equivalent including temps) at March 31, 2009. These measures were stepped up in 2009-10 with the opportunities extended to personal leave and the development of part-time working, leading to a 4.4% reduction in headcount at March 31, 2010. Finally, in September 2009, Air France announced a voluntary redundancy plan for ground staff involving 1,684 employees. The plan closed on May 14, 2010 having met with the expected success. At March 31, 2010, the Group constituted a €152 million provision for restructuring charges, of which €148 million for this plan.
