Transforming Transavia: Air France/KLM continues to bet big on its already-established LCC
When it comes to attracting attention, Boost rules the roost. That’s the new lower-cost airline Air France is creating, with great fanfare, to cut losses on longhaul and shorthaul routes from its Paris Charles de Gaulle hub. But Air France/KLM, don’t forget, already has a low-cost unit. It’s called Transavia, and it flies from key airports other than Paris Charles de Gaulle, including Paris Orly, Amsterdam Schiphol and several secondary French and Dutch cities.
Transavia is certainly not new. Its history, in fact, goes all the way back to the 1960s, flying Dutch sunseekers primarily to spots along the Mediterranean, often on behalf of tour operators. KLM took control of it in the early 1990s, and it contributed healthy profits—healthy enough to encourage Air France to create a French version in 2007 (not to mention a short-lived Danish version in 2009). Transavia France, as the new French LCC would be called, began life with seven B737s operating routes from Paris Orly to leisure spots like Portugal, Spain and Italy and family-visit markets like Morocco and Tunisia. Although it shared a name with Transavia Netherlands, Transavia France was and remains a separate operation with its own labor force, fleet and operating certificate.
As it happens, this month marks the 10th anniversary of Transavia France. Unfortunately, the celebrations aren’t so festive. Air France/KLM doesn’t disclose financial details for Transavia France and Transavia Netherlands individually. But it does report earnings, or lack thereof, for Transavia as a whole, which haven’t been good. Last year, the low-cost brand managed only a breakeven result, even as Air France and KLM mainline each recorded profits. In 2015, Transavia’s operating margin was negative 3%, just as it was in 2014. In 2013 it was negative 2%. This suggests Transavia suffers from the same problem that has long plagued lower-cost units of legacy airline companies everywhere: Its costs are only somewhat lower than mainline costs, whereas its revenues are far lower. That’s as true for Transavia as it was for Buzz (KLM), Centralwings (LOT Polish), Delta Express, Go (British Airways), Metrojet (US Airways), Shuttle by United, Song (Delta again), Snowflake (SAS), Ted (United again) and Tango (Air Canada). Jetstar (Qantas) has long been the major global exception. Again, management won’t say…
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