After almost one year and a half since the world pandemic originated the most dramatic crisis in the history of aviation, airlines are now expecting an imminent rebound in air travel demand and are therefore focusing on expansionary strategies. As such, and following United’s recent massive purchase of 270 new aircraft, the Franco-Dutch holding has started a process through which it expects to incorporate up to 160 brand new aircraft among some of its divisions.
If concluded, the unprecedented order could mark the group’s largest purchase in its history as it looks to “renew and extend” KLM’s short/medium-haul operations while strongly betting on the low-cost divisions of Transavia – in France and The Netherlands – for the post-Covid era.
Despite being part of a single group, the business models that the different airlines have adopted over the past decades have differed in terms of the aircraft type. While Air France inclined for an Airbus family fleet, KLM went for a rather all-Boeing one. This rule has been pursued by head officers of the group by transferring current A350 and B787 orders to one another so that the fleets remain as homogeneous and cost-efficient as possible.
The Transavia divisions, on the other hand, follow the typical discount model by using a single aircraft type (the Boeing B737, generally the NG variant), among which some units are reaching their end-of-life.
The much-awaited tender was confirmed by Air France-KLM’s CEO, Ben Smith, in the Dutch newspaper Het Financieele Dagblad in these terms: “We’ve done a little bit in this area, it’s been on the agenda since 2004, but it’s never been put in place as it is now.”
Parallelly, he has admitted falling behind competitors in Europe; it went from number one back in 2004 to hold the third position these days and has urged all of its partners to further advance in cooperation so that they can respond more promptly to market variations.
He has also shown some optimism regarding the Group’s future by noting that they can work as “effectively” as their competitors as they make some efforts “to move forward a little bit faster.” Given the destination of the brand new aircraft, one might wonder why the company still considers Airbus family planes for such a large acquisition.
The alternative seems to be the Boeing 737MAX as it does not represent a big change from the current Boeing 737-700’s and -800’s, ultimately avoiding substantial costs of transitioning to a different type. And yet again, this seems to be the case, at least for the discount division Transavia as it is Mr. Smith’s intention (reported by Bloomberg.com) to expand and triple the amount of these jets in France in an attempt to recover the market share lost so far to competitors.
However, the launch of the tender comes after more than €10bn have been injected into the group by the two states and shareholders, meaning the influence of them both must also be considered. To top up such a rescue plan with additional €4bn from the French state, the management of the public money is conditioned to many interests. As a consequence, investing in local manufacturer Airbus might as well be an involuntary alternative.
In any case, we will have to keep an eye on how this extraordinary deal finalizes. In the meantime, Air France will start be receiving the A220 for its short-haul operations while KLM has already started receiving 25 Embraer 195-E2’s for its Cityhopper regional division. The new order will strengthen the Group’s short- and medium-haul operations while it enables the company to further commit to a more sustainable industry.
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