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Air France - KLM -‘The Future of the Airline Industry‘- International Aviation Club – Washington January 29, 2008 L. Van Wijk, Vice - chairman Air France - KLM
Air France - KLM- ‘The Future of the Airline Industry‘-
International Aviation Club – Washington January 29, 2008
L. Van Wijk, Vice - chairman Air France - KLM
2 Aviation Club Washington, January 29, 2008
The Airline Industry has changed
• From historically regulated to liberalized markets - The European airline industry gradually liberalized from 1987
onwards; final step in 1997
• In deregulated and liberalized markets consolidation is inevitable- Domestic
- E.g.: BA and British Caledonia, US Airways and American West- But more recent: Air France and KLM, Lufthansa and Swissair
• As a rule in most industries: consolidation by take-over/merger• In international airline industry: consolidation by global alliances
3 Aviation Club Washington, January 29, 2008
16
18
17
London
Frankfurt
Amsterdam
Skyteam
Star Alliance
OneWorld
(Munich)
Zurich
Madrid
Milan
Vienna
Copenhagen
European landscape of alliance formation and consolidation
Paris
4 Aviation Club Washington, January 29, 2008
Mexico City
Denver
Dallas
Seattle
Los Angeles
Vancouver
San Francisco
Toronto
Houston
Miami
Atlanta
Montréal
Boston
New York
PhiladelphiaWashington
Chicago
Detroit
Charlotte
Portland
TampaOrlando
Phoenix
Minneapolis
Cincinnati
Memphis
AMERICAN AIRLINES
DELTA AIRLINES
NORTHWEST AIRLINES
CONTINENTAL AIRLINES
US AIRWAYS + AMERICA WEST
USA - Hub situation
UNITED AIRLINES
SkyTeam:
Star:
Oneworld:
5 Aviation Club Washington, January 29, 2008
Growing Importance of Alliances- Three Global Alliances-
After several attempts … air transport is consolidatingaround three major alliances
Isolated companies are now looking to join one of the threemajor alliances
SkyTeam : AF, KL, NW, CO, KE, AZ, AM, CZ, OK, SU, DL
Oneworld : AA, AY, BA, IB, LA, QF, JL, RJ, MAStar Alliance: AC, JK, LH, LO, NH, NZ, OS, SK,
SQ, TG, UA, US, BD, YP, SA, LX
6 Aviation Club Washington, January 29, 2008
Source: Jan 2008 OAG data
SkyTeam 29 %oneworld 20 % Star 12 %Others 39 %
SkyTeam 32 %Star 30 %oneworld 22 %Others 16 %
Star 36%SkyTeam 26 %oneworld 22 %Others 16 %
Star 24 %SkyTeam 19 %oneworld 16 %Others 41 %
oneworld 32 %SkyTeam 27 %Star 13 %Others 28 %
SkyTeam 21 %Star 9 %oneworld 8 %Others 62 %
Benchmark – Intercontinental Market Share
7 Aviation Club Washington, January 29, 2008
The Composition of Alliances is not stable yetNorth & South America Europe/Africa Asia/India
8 Aviation Club Washington, January 29, 2008
New Generation Alliances- Change of intensity of cooperation -
Intensity of cooperation
Interl
ining SPA
Codeshari
ng
Joint C
ommunicatio
n
Joint p
urchas
ing
Alliance
Branding
Aligned
policies
&
procedures
Joint V
entures
Organisa
tional
Integrat
ion
Full Merg
er
Syne
rgy New Generation Alliances
Irreversible:Focus on cost and network efficiencies
1st Generation AlliancesReversible:
Focus on revenues and network span
Major industry change
9 Aviation Club Washington, January 29, 2008
The US-EU Open Skies agreement: new opportunities
EU countries without open sky agreement up to now (11)
Any EU carrier can requestAntitrust Immunitywith a US carrier**
* Bermuda II US-UK bilateral agreement restricted Heathrow access to 4 carriers: AA, UA, BA and VS** The US government does not allow carriers from non open-sky countries to request ATI with their US partners
All US carriers at last permitted to fly from their hubs to
Heathrow
Any EU carrier and any US carrier can now operate flights between any EU
country and the US
Any EU carrier can now codeshare on any US carrier non-stop flight from any US city to any EU city
1
2
3
4
10 Aviation Club Washington, January 29, 2008
What is so special about Heathrow?London High Contribution O&D market to the US is more than 3 times the size of the next largest
USA high contribution O&D traffic (Passenger per day each way)
263366
481
1,584
London Paris CDG Frankfurt Amsterdam
Gatwick
Heathrow
11 Aviation Club Washington, January 29, 2008
The 3 main pillars of Air France - KLM strategy in London
• Direct transatlantic flights out of Heathrow in cooperation with US partners:- 9 non-stop US destinations from London- Other SkyTeam long-haul destination:
- Seoul, Nairobi
• Strong point-to-point short and medium haul:- 13 Air France - KLM European destinations- 3 other SkyTeam European destinations
• Rest of the world very competitive offer through our two intercontinental hubs of SPL and CDG
• SkyTeam partners regrouped at Heathrow T4
12 Aviation Club Washington, January 29, 2008
Future of alliances is about meeting the demands of our passengers
• Meet the customers needs :- Frequent Flyer Programs (E.g. FFP Mileage upgrades)- From Aligned services to Joint Services- Alliance-branded Lounges (e.g. LHR Showcase at Terminal 4)- From different product to common product
13 Aviation Club Washington, January 29, 2008
IT hurdle
14 Aviation Club Washington, January 29, 2008
In Summary….
• Future of Industry revolves around
- Continental consolidation
- Intercontinental Joint Ventures within Global Alliances
- With harmonized services
