Air France-KLM Plans a Budget Airline to Fight Costs

"The Air France-KLM Group's ambition is to regain the offensive to return to a leadership position in the global air transport industry", it said in a statement.

He argues that the situation will be similar to the build-up of budget short-haul unit Transavia in recent years, for which the group found sufficient pilot volunteers within Air France. In effect, this completes a full set of profit warnings from the big three legacy groups, since IAG and Lufthansa have already signalled a lowering of their profit outlook for 2016.

Part of the push involves the launch of a brand new airline- as yet unnamed - that will offer a mix of operations on new routes, routes under threat, and routes that have previously been closed for their lack of profitability.

Janaillac also becomes chairman of Air France, as well as holding down the same role at Air France-KLM.

Still, the company says that while the new line would be less lavish than Air France flights now are, it won't be as basic as other discount carriers.

It predicts costs will come down by 1 per cent this year.

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Air France-KLM said it was seeing no let-up in pressure on revenues at its core airline business at the end of the year after attacks kept tourists from the United States and Asia away from France.

Despite the cost-cutting efforts, Janaillac insists the product "will not be low-cost". The new airline will include economy and business class flights with amenities like lie-flat seats, according to Reuters.

According to the company, Boost will not simply be a new low-priced long-haul operation.

The new company would transfer Air France pilots, who would fly more hours for the same pay, and recruit new flight attendants with fewer benefits than Air France crew now enjoy.

The group will also study a spin-off of its maintenance arm, although intends to retain control of the unit, it added.

Group-wide, it said it was aiming for sales of 28 billion euros (25 billion pounds) by 2020, with 100 million passengers, compared with 90 million in 2015, and a fleet of 435 planes, not including regional planes.


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