Air France - KLM “how to survive the global battle”
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Transcript of Air France - KLM “how to survive the global battle”
Air France - KLM“how to survive the global battle”
Presentation for TU-Delft International Seminar on Airport Planning
‘Airport of the Future’
Thursday, 30 March 2006
Athar Husain Khan
Director Government & Industry Affairs
“Make flexible adjustment of tactics accordingto changing circumstances of the battlefield”
(Sunzi’s Art of War, around 250 BC)
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Contents ...
• Brief history
• Our strategy
• Where do we stand
• External world
• Opportunities
• Challenges
• What do we need
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June 1989
May 2004
1993
?
?
• June 1989 : KLM investment in NW• September 1997 : Global JV
• Begin 2002 : informal discussions• Spring 2003 : discussions intensify• September 2003 : public announcement • May 04 : entry into force• September 2004 ; Joint holding Air France - KLM
?1992
1999
2000
… quest for economies of scale and scope ...
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… our strategy ...
• Committed to play a frontrunner role as a truly European airline
• Operating under a bi-national structure, from a dual-hub system
• Aiming for profitable growth / fit to compete
• Managing the transition to a global free market
• Creating favourable conditions: costs, infrastructure
• Securing Europe’s global competitiveness
• Demonstrating good citizenship: environment/social
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.. market size segmentation for a dual hub ...
Number of O&D passengers
Stations
Tertiary stations KRS, PSA, TRD, VGO, ...
Secondary stations MRS, GOT, TRN, BGO ...
Primary stations MAD, BCN, FCO, ...
Super stations LHR, CDG, ...
Dual hub service
(CDG & AMS)
Dual or single
hub service
Single hub
service
(CDG or AMS)
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… KLM + Air France + SkyTeam ...
645 destinations
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North America
Latin America Africa
Asia
Middle East
Europe AF-KL: ~12%1st European
carrier
AF-KL: ~10%2nd European
carrier AF-KL: ~8%1st European
carrier
AF-KL: ~16%1st European
carrier
AF-KL: ~24%1st European
carrier
Capacity share on Europe-Long-haul routes
Source: OAG data week 37 (Summer 2005) – non stop operating flights
… European leader on main global markets ...
Long HaulAF-KL: 13.2%BA: 8.8%LH: 8.0%
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… and the largest in turnover…in bln US$
0
5 000
10 000
15 000
20 000
25 000
30 000
AF-KL LH JL AA UA DL BA AN NW CO QF SK SQ US
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… need for transfer traffic at Schiphol ...
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Local Transfer
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80-ies : USA 90-ies : Europe
1980Atlanta
1986Washington
hub model USAmedium-haul – medium- haul
Atlanta, Chicago, Dallas…
hub model Europelong-haul –
medium -haulParis, Frankfurt,
Schiphol,...
hub model Orientlong-haul –
long-haulDubai
SchipholFrankfurt
1996Paris
1981Dallas
2000~ Gulf
2000-01Dubai
1992
… hub development ...
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… and the external turmoil continues ...
• Iraq crisis, Bird Flu, Iran-IAEA, what more?
• Still increasing external costs: fuel, airports, Air Traffic Control
• Increasing regulatory costs: security, environment
• United States Chapter 11, bankruptcies
• Inevitable consolidation between airlines
• Ongoing liberalisation (EU-US and others)
• Low cost / no frills carriers, more differentiation and competition
• Ambitious developments in the Middle East (Dubai et al)
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Rising fuel costs Air France-KLM (04/05 + 33.3% to € 2.65 bln, Q1 05/06 y-o-y + 32.2% to € 809 mln)
63.160
35
40
45
50
55
60
65
70
Daily Brent crude OilLast update: 16sep05
… somewhat lower but still high oil prices ...
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… the operating charges we pay ...
16%
32%
9%
8%
6%
3%
26%
fuel
labour
depreciation andprovisions
landing fees & routecharges
commercial &distribution costs
operating leases
other charges
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Oneworld hubs
SkyTeam hubs
Star alliance hubs
CPH
FRA
MUC
VIE
MXP
CDG
MAD
LHR AMS
… and the battle for Europe ...
ZRH
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… in a growing European passenger market ...
0
10,000
20,000
30,000
40,000
50,000
60,000
4/1/
88
4/1/
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4/1/
90
4/1/
91
4/1/
92
4/1/
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4/1/
94
4/1/
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4/1/
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4/1/
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4/1/
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4/1/
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4/1/
00
4/1/
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4/1/
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4/1/
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4/1/
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4/1/
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4/1/
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AEA Total Scheduled Passenger Traffic (in million RPK)
Source: AEA, incl.domestic, excl. charters
Average annual growth rate 1988-2003: 6.0 %(passenger traffic within and to/from Europe)
Expected growth rate of 4-5 % per year until 2012
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… an opportunity : China ... - Traffic growth perspectives -
Very strong growth between China and Europe +18% p.a.Until today (last 10 years)
4,3 million passengers in 2004
Emerging Chinese middle class
Tourism and VFR traffic potential (bothinbound and outbound)
Increasing presence of foreign firms inthis huge market
Chinese firms developing their presencein the Rest of the World
Crisis of the financial system
Implosion of the single party
Potential hitches in Chinese development : corruption, violationof intellectual property, increasing social inequalities
Chinese tourism development slowed by measures to counterillegal immigration
Exposure to major epidemics (SARS …)
Opportunities
China Domestic+15% p.a.
China - Europe 12% p.a.
Risks
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… the passenger market ...
Transfer potential
158 Mln.
Worldwidepassenger market
1.600 mln
European passenger market
(intra - EUR)
558 mln
Relevant marketfor Schiphol
185 mln
Rest of the world
1033 Mln.
Europe related market
554 Mln.
Rest of Europe related
373 Mln.
SPLrelevantmarket
185 Mln.
Local traffic SPL 24 mln(89% share of NL market)
Transfer at SPL 18 mln (11 % share of transfer traffic)
Traffic at Schiphol
42 mln
Local potential 27 mln
Transfer potential 158 mln
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… lcc/nfc fast growth over the last 3 years ...
2002easyJet: 44 routes
1.840 flts/weekRyanair: 76 routes
2.220 flts/weekKL Eur.: 2.530 flts/week
2005easyJet: 92 routes
4.738 flts/weekRyanair: 222 routes
4.477 flts/weekKL Eur.: 3.200 flts/week
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… growth of the lcc fleet ...
108 134 149 176 197
96121
147167
186
53
60
69
74
79
218
91
204
77
88
47
2004 2005 2006 2007 2008 2009 2010
Air Berlin/Niki
Ryanair
easyJet
Sources : Airclaims, press releases, OAG
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UK - India
Australia - UK/Eur
Asia - Africa
USA-more Europe
… also the Middle East has ambitions ...
‘90~
‘95~
‘00~
‘05~
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Sources : Airclaims, press releases, Global Insight
10 9 9 8 5 3 1 1 1 1
6 6 6 6 5 3
4 6 6 6
6 6 6 6 6 3
3 3 3 3
3 3 3 3 3 3
1
5 13 19 24 29 29 29 29
27 24 24 24 24 24
2 3 4
9 12 12 12
12 12
12 12 12 12 12
4 8 10 10
10 10 10 10 10 10
8 8 8
8 8 8 8 8 8
10 18 26 30 30 30 30 30
4 10
16 24 27 30 33
1
7
10 13
16 20
16 19
22 24
10
29 33 35
43
55
67
79 85
94
107
118 124
130 137
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
A380-800
A340-600
B777-300ER
A340-300
A340-500
B777-300
A330-200
Seats (04-10) : +15,7%Seats (95-04) : +20,5%
Emirates fleet plan… with their fleet plan ...
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… what do we need on national level ...
• Capacity at Schiphol > mainport requirements- infrastructure- environment
• Low costs and high quality from our service providers > Schiphol and ATC-LVNL
• A government with a vision and integrated policy regarding the long term development of aviation in NL
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… and what do we need at European level ...
• An integrated European aviation policy to enhance:
- Reduction of costs (security)
- Addressing the imbalance (airline-airport relationship)
- A level playing field both intra and outside the EU (market access, environment)
- Innovation (ETS, SESAR)