Air France, EasyJet square off in discount battle for Marseille
PARIS: Air France-KLM Group's plan to regain lost market share on short-haul routes may pitch Europe's largest carrier into a battle with EasyJet Plc over the Mediterranean port city of Marseille.
Air France may begin services from the secondlargest French city to towns such as Marrakesh and Tangier in Morocco, which Ryanair Holdings Plc will quit in January, Bruno Matheu, Air France's network chief, said in an interview.
"Our objective is to win back some of the point-to-point market," Matheu said. The exit of Ireland's Ryanair, Europe's largest discount carrier, is "an argument in favor of opening the Marseille base first."
Under its regional-base plan unveiled last month, Paris-based Air France aims to operate from provincial cities with a fleet of 40 aircraft split equally among Bordeaux, Nice, Marseille and Toulouse. Flights will commence from one city on June 1, with all four bases due to be operational nine months afterwards, Matheu said.
The new model will involve running part of the single-aisle fleet from the regional sites instead of Paris and flying each plane for 12 hours a day rather than the current eight or nine hours, with faster turnarounds. Staff will work longer and be based locally, cutting travel time and accommodation expenses.
"Air France took their sweet time figuring out that low-cost was a competitive threat," said Penny Butcher, an analyst at Morgan Stanley in London. "EasyJet is now their biggest domestic challenge and Marseille will be a test case."
Air France is targeting the Mediterranean city after Ryanair said on Oct. 13 it would withdraw four planes there following legal action for alleged breaches of French employment law. The Dublinbased airline will drop 13 of 23 locations served, including the French cities of Lille and Nantes, Eindhoven in the Netherlands and four Moroccan towns.
EasyJet is also looking at routes from Marseille abandoned by Ryanair and aims to triple its market share in France, where discount carriers claim 20 percent of sales, half the European average, regional manager Francois Bacchetta said. The company is also adding services from Lyon and Paris Charles de Gaulle, where it took advantage of the economic slump to grab takeoff and landing slots.
Air France's share of home traffic, measured in domestic and international passenger numbers, fell to 34 percent last year from 39 percent in 2002, when EasyJet opened its first French base at Paris Orly. Over the same period, the U.K. carrier more than quadrupled its market share to 7.6 percent.
EasyJet said last month it will begin selling pricier flexible tickets through professional booking platforms, as competition for short-haul business passengers intensifies. Air France will respond with incentives targeting smaller companies that don't qualify for its corporate discounts, Matheu said.
"The big corporate clients may have stuck with Air France, but a lot of small businesses have defected to EasyJet on shorter routes," said Yan Derocles, a Paris-based analyst with Oddo Securities who has a "buy" recommendation for Air France and "add" ratings for EasyJet and Ryanair. "Air France may be able to get some of them back, especially on routes where they can add frequencies."
Air France gained 23 percent in the past 12 months. Ryanair jumped 35 percent, while EasyJet is up 14 percent. The Bloomberg EMEA Airlines Index increased 21 percent in the same period.
Air France is already holding its own in direct competition with EasyJet on the LyonToulouse and Lyon-Bordeaux routes, Matheu said in the Dec. 2 interview. "We're not very far from breakeven, despite their presence," he said, adding that the carrier will still avoid opening any new routes to the hubs of a low-cost competitor. -Bloomberg