Air France, EasyJet square off in dis­count bat­tle for Mar­seille

The Pak Banker - - Company& -

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

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