Passenger business

The passenger business is Air France-KLM’s principal activity, contributing some 80% of the Group’s revenues.

In 2013, the Group continued to implement the action plans launched within the framework of Transform 2015. While maintaining strict capacity discipline (+1.6 %), the passenger business focused its efforts on improving the profitability of each of the relevant companies, restructuring the heavily-loss making medium-haul operations, developing the network in the regions with most potential while stepping up investment in products and services and developing new initiatives to serve its customers more effectively.

Medium-haul operations

The short and medium-haul network is a cornerstone of the Group’s development in that it ensures not only its operations across Europe and the power of marketing tools like the Flying Blue frequent flyer program or contracts with companies and the major agency networks, but also feeds the long-haul flights at the dual hubs of Paris-CDG and Amsterdam-Schiphol.

New organization and the launch of HOP!

While preserving its strong position in the French medium-haul market, the Group must adapt its offer to customer demand and gain efficiency. This is why Air France’s medium-haul operations have been the subject of a dual reorganization. Within the activity operated in Airbus aircraft belonging to the A320 family, as of January 1, 2013 the Group has been organized around two business units: one responsible for the flights on departure from the Paris-CDG hub and the provincial bases and the second covering the point-to-point activities on departure from Paris-Orly and the provincial bases. The regional activity, formerly operated by three airlines (Brit Air, Régional and Airlinair) has been regrouped under a single HOP! brand, launched on March 31, 2013. At the end of December 2013 the Group received a firm bid for the acquisition of its regional subsidiary CityJet. The transaction should be finalized during the 2014 first half.

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Repositioning the offering

The work to reposition the medium-haul offer was carried out in 2013 for both business and leisure customers.

Long-haul operationsTargeted growth in capacity and limited investment in the fleet

In 2013, the modest growth in long-haul capacity was focused on the most rapidly-growing regions, Latin America and Asia:

- with three weekly flights, Panama City is now served on departure from Paris-CDG, in addition to the daily flight on departure from Amsterdam-Schiphol. Serving this destination from the Group’s dual hubs enables the multiplication of connecting opportunities;

- the Group has launched flights to Montevideo as an extension to the Buenos-Aires flights, with five weekly flights, reinforcing its presence in Latin America;

- in February 2014, KLM will launch the Santiago du Chile route with three weekly flights, in addition to the daily flight operated by Air France;

- the two innovations in Asia were the launch of the Fukuoka service by KLM, with three weekly flights, and the opening of Kuala Lumpur by Air France, in addition to the daily flight operated by KLM.

Long-haul product upgrade

Within the framework of its strategy of best-in-class positioning, the Group has intensified its investment in enhancing the travel experience, in particular via major reconfiguration programs for the long-haul cabins.

At KLM, this best-in-class ambition was reflected in the launch of a new World Business Class, conceived by the famous designer Hella Jongerius. The installation of this new seat began during the summer of 2013 and 22 Boeing 747-400s will be equipped by the end of 2014. In 2014, the 15 Boeing 777-200s will receive the new World Business Class seat, new seats in economy class and an upgraded In Flight Entertainment system. All the product investment planned at KLM represents no less than €200 million between 2012 and 2015. In 2013, all KLM’s efforts were rewarded when SkyTrax awarded the company four stars.

In 2013, Air France carried out the preliminary studies for its Best & Beyond project aimed at refitting the cabins of 44 Boeing 777s. The first flight with the new equipment is planned for June 2014. The Boeing 777s will be equipped with a new Business class seat to the highest-possible standards: full flat (convering into a fully flat bed), full access (direct access to the aisle) and full privacy (maximizing each passenger’s private space). These aircraft will also benefit from new seats in the Economy and Premium Economy classes together with new in-flight entertainment systems in line with the best industry standards. The new First Class product will only be revealed in the second quarter of 2014. All the product investment planned at Air France will represent no less than €500 million between 2012 and 2015.

Leveraging the strengths of the hubs

The dual hub system retains its central function within the passenger activity. The powerful and coordinated hubs of Paris-CDG and Amsterdam-Schiphol, inter-linked by 12 daily flights, offer 30,430 weekly connecting opportunities between European medium-haul and international long-haul flights in under two hours. The combination of the dual hubs of CDG and Schiphol, which is unique in Europe, enables the Air France-KLM Group to offer a large number of frequencies per destination and an extensive range of flight times.

New initiatives to improve the competitiveness of the hubs

Within the framework of Transform 2015, a series of initiatives have been launched to improve service quality, reduce costs and increase the competitiveness of the Group’s two hubs.

Pursuing customer-centric initiatives

In addition to repositioning the offering and improving the competitiveness of the hubs, the Group is pursuing numerous customer-centric initiatives to differentiate it from competitors.

More choice and control

Thanks to the internet and mobile technologies, customers have evermore opportunities to compare offerings and choose those which best meet their needs. A la carte purchasing is a fundamental trend in customer behaviour.

 

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More autonomy and self service at the airport

From improving the check-in experience to facilitating the baggage drop-off and boarding processes, Air France and KLM have continued to invest in new technologies to improve the customer experience at airports.

On-going digital innovation

Mobile services and online sales are at the heart of today’s commercial relationships. The Group is permanently working on improving these services which must not only become simpler and more reliable but also offer a more rewarding customer experience and be accessible from all the mobile devices whose usage has exploded (smartphones, tablets).

Differentiation via the customer relationship

In their interaction with service companies, customers are increasingly expressing a preference for brands that are capable of offering them genuine, empathetic and responsive human contact. To meet these expectations the Group has launched a number of initiatives aimed at, notably, empowering the teams in direct contact with customers.

 Adaptation of the commercial organization

Within the framework of the change in the Group’s governance, a new commercial organization was launched on July 1, 2013. The main commercial functions (sales, revenue management and pricing, distribution, digital, etc.) were regrouped to gain responsiveness and proximity to customers.

A more attractive Flying Blue frequent flyer program

With 22 million members, more than 30 airline partners and more than 100 non-airline partners, Flying Blue is the leading frequent flyer program in Europe.

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