What’s the impact on Air France’s operations at Paris Orly, now that it has to surrender eighteen daily slots? The answer to this question still seems unresolved, depending on whom you listen to. Air France-KLM CEO Ben Smith says that giving up slots at Paris Orly is “very frustrating” for Air France, but the Secretary of Finance Bruno Le Maire thinks that at just four percent of total Orly-slots, the impact will be limited.
Releasing the eighteen slots is part of the latest aid package announced on April 6, when the French state said it will raise its equity in Air France-KLM from 14.3 to 29.9 percent for EUR 1.0 billion. Another EUR 3.0 billion in loans/debt will be converted into equity. Initially, the European Commission requested the release of up to 24 slots at Paris’ second airport, but this has been reduced to eighteen. This is equivalent to four percent of all daily Air France slots at Orly, Le Maire said. As such, the reduction is limited and acceptable to the government, although four percent still translates into 6.570 flights on an annual basis.
Difficult to align with conditions
During today’s virtual World Aviation Festival, Ben Smith (restrained as ever…) was worried and frustrated by the surrender of the Orly slots: “It is very frustrating. It makes it more difficult to return to profitability. We are a global carrier. It is very, very difficult to align to these conditions, but we know what they are. We are fortunate that we operate at two airports. We have over 1.000 slots at Roissy (CdG) and Orly, of which we return eighteen at Orly.”
Asked about how competition from other low-costs entering Orly might have an impact there on Air France, Smith said: “We are in the middle of a major transformation of our French domestic market. Even before the crisis, we were in a big transformation with pulling our high-cost regional operation hub out of Orly. We signed two big, very flexible agreements with our pilots and placed our low-cost activities of Transavia into Orly, which more than doubled. This gives us a tool to get even stronger at Orly. Whoever takes up these (eighteen) slots, we now have a much stronger tool to fight this in a much more powerful way.”
As reported last September on Airinsight, Transavia France has been planning for expansion since 2019, but only got the final nod from influential cockpit crew union SNPL in September last year. The Covid-crisis has delayed the plan, but the low-cost airline has announced a number of new routes out of Orly for the coming weeks and months. It currently serves 68 destinations out of Orly, where it has operated since 2007. Other hubs are Nantes, Lyon, and Montpellier. The carrier started domestic operations in Q4 last year.
In a way, Transavia’s position at Orly seems to be protected by a condition set out by the government: every airline that applies for the former eighteen Air France slots and wants to establish a base at the airport must abide by strong French social conditions. Ryanair, who asked for the surrender of AF slots at Orly, and Wizz are interested in the Orly slots.
Climate law curtails domestic flights
Of further significance to Air France’s and Transavia’s domestic operations is something else. Late on Saturday evening of April 10, the French parliament or Assemblee Nationale adopted a law late that forbids all domestic flights up to 2.5 hours when train services are an alternative. The law, which was met with strong opposition from deputies from the southwest of France, abolishes domestic flights to cities like Nantes, Bordeaux, and Lyon, but there is an exemption for flights out of Charles de Gaulle. The law is part of a climate package as the Macron government wants aviation to contribute stronger to climate plans. Critics say that the effects are marginal and the government would have done a better job if they had introduced a four-hour journey time.
Ben Smith earlier said Air France will curtail domestic services by forty percent before the end of the year. At today’s webcast, he noted that the growth of the high-speed rail network isn’t new in France, where travelers have got accustomed to using the TGV, and every decade a new route has been added. The expansion of the high-speed network is one of the reasons Air France and its regional subsidiary HOP! have suffered a EUR 200 million loss in 2019. “It has pushed over half of all air passengers or even more than that to the train”, Smith said.
That’s why the carrier is in the midst of a major restructuring of its domestic airline. “One of the conditions that were put in place as part of the government support from last year was the requirement for the suspension or elimination of all routes where there is a train option for journeys of up to two hours and thirty minutes. We still offer flights to Charles de Gaulle on a national connection basis, but domestic flights to Orly have been eliminated. This is forcing us to move faster and put in place inter-model options. CdG has a TGV stop and we are hopeful that this will drive more connections through our facilities.”
Expect some serious thinking at Air France and Transavia France as to how they can mitigate the effects from both the slot reductions at Orly and the new climate law.