Air France-KLM will consider Boeing 737 MAX, Airbus A320neo and A220 aircraft types as it prepares to renew its short- and medium-haul fleet, CEO Ben Smith told ATW on the sidelines of the Paris Air Forum June 14. He said the group is also considering how long the Airbus A380 will remain part of its fleet.

On short- and medium-haul aircraft, Smith said: “We’re in no rush; we are evaluating all three major options out there, the MAX, the neo and the A220. We hope to have a good understanding of what makes sense to us,” he said, adding that negotiations about lifting a fleet cap at low-cost subsidiary Transavia France would be “step one”—as whether or not Transavia’s fleet is renewed at the same time, the group needs clarity on what will be happening with Transavia before making any other fleet decisions. 

Air France-KLM said May 27 that unions representing Air France pilots had voted in favor of starting negotiations to increase the Transavia France fleet, which is currently capped at 40 aircraft. 

Asked about cabin strategy, Smith said gave an update on the group’s Airbus A380s. It has 10 but three are already scheduled to exit the fleet.

 “The other seven have older seats and we’re in the middle of making the decision on how long those A380s will be staying in the Air France fleet and whether we should invest €30-€40 million ($33.8-$45.1 million) per aircraft in upgrading those seats,” Smith told the forum.

The former Air Canada executive took over as CEO in September 2018 and swiftly made progress in calming a long-running labor relations crisis at Air France. He is now looking ahead to a long-term strategic plan for the group.

Smith also told to the Paris Air Forum about Air France-KLM’s ambition to compete financially with IAG and Lufthansa, which he said was “definitely achievable. Five years is the timeline we’ve given ourselves.” 

Air France-KLM EVP-strategy Angus Clarke also told the forum that under Smith’s leadership the group’s priorities are:

  • Simplicity around the fleet;
  • Efficiency of aircraft layouts;
  • Consistency of product; and
  • Employee engagement and balance sheet strength.

“These things take time. It’s a five-plus-year mission to get Air France to the same operating margin as KLM, which is the aspiration and having a strong group that can compete very effectively with [Irish LCC] Ryanair, [UK LCC] easyJet, IAG and Lufthansa. That’s the ambition,” Clarke said. 

The negotiations over Transavia, which Smith said were “going well,” are part of the steps Air France-KLM needs to take to be in a position to better compete with its European counterparts he said. “That tool is needed.” 

Smith’s predecessor Jean-Marc Janaillac, who left last year because of a bitter and disruptive dispute over pay with employees, had set out a strategic plan aimed at improving profitability and competitiveness for the Air France-KLM, particularly in the face of stiff competition from Gulf carriers. Smith is set to give a more detailed strategy update at a capital markets day planned for November.

“Gulf carriers are the number one threat that we have Air France-KLM. We’re not really competing against airlines,” Smith said: “We’re competing against governments. And these governments have policies to fully support their airlines. Their expectations and what they believe they are entitled to is full access to our markets in the Netherlands and France in return for access to markets that are really not interesting. The trade deal is not balanced.”

Following tensions between Air France and its smaller partner KLM and the Netherlands’ state’s surprise move earlier this year to buy a stake in the group, leaving it with 14% compared with the French state’s 14.3%, Smith said that modifications to the group’s governance had evened up the balance between Air France and KLM and paved the way for smoother functioning of the group. 

Helen Massy-Beresford,