Air France KLM Strategy

The customers' business' interest in the low cost

Thanks to the tariffs, low costs are attracting not only a part of the existing demand but they also create additional demand. Thus, the Directorate General of Civil Aviation considers that on Paris-Dublin even posing in Beauvais (72 km from Paris), the airline Ryanair has helped to increase by 30% traffic of the line.

In addition, if the launch of a connection is largely due to a clientele with capabilities contributory weak able to determine his movements ahead, from a threshold of 2 to 3 frequencies per day, low-cost airline to "get" the business clientele, especially if it is located near the major economic centers, as is the case with Easyjet in Orly and Roissy Charles.

In Europe, in June 2002, the low-cost accounted for 8.65% of traffic on the intra-market, which is 3 points higher than in 2000. By way of comparison, the low-cost American up more than a quarter of American domestic market in number of passengers carried.

In France, the development of these companies is a recent but has been very rapid. Beginning in March 1996, Virgin Express opened a liaison Nice-Bruxelles. Since then, other companies have come to join, which accounted for 5 million passengers in 2002 (12% of intra-Community traffic french, 5% of the traffic french total) compared to only 2.6 million passengers in 2001 (7% french intra-Community traffic, 2.7% of total traffic french).

This share reached 23.2% in the province against 5.7% for Parisian airports. However, as stated in a study by the Directorate of Air Transport Ministry of Equipment introducing the figures over the last four years of their presence in France, "it is still only 3% to Orly and Roissy Charles confused because the companies are located there and more recently in a limited way. "

TRAFFIC OF COMPANIES TO BAS-COÛTS AND ALLOCATION COUNTRY OF ORIGIN AND DESTINATION

		Passengers		Share
		2001	2002	2001	2002
France	U.K.	1 909 791	3 020 188	69,1 %	58,9%
With traffic to and from London		1 641 369	2 453 046	59,4 %	47,8%
France	Switzerland	192 636	442 120	7,0 %	8,6%
France	Ireland	255 487	341 860	9,2 %	6,7%
France	Netherlands	217 189	318 442	7,9 %	6,2%
France	Belgium	190 041	307 599	6,9 %	6,0%
France	France	98	282 947	0,0 %	5,5%
France	Germany	70	205 048	0,0 %	4,0%
France	Sweden	0	174 341	0,0 %	3,4 %
France	Norway	0	32 955	0,0 %	0,6 %
France	Italy	190	4 204	0,0 %	0,1 %
France	Spain	0	171	0,0 %	0,0 %
	Total	2 765 502	5 129 875	100,0 %	100,0 %

In addition, as noted in the study, "well enough recently established in France, foreign companies to bas-coûts are present on 28 airports french," including small provincial airports, as Bergerac, Caen, Dijon, Rouen or Tours, as these companies often contribute to the revitalization. It is a deliberate strategy on the part of low-cost airlines, including Ryanair, due to the scarcity of available slots in Paris and the cost of operating routes to those airports.

The companies established in France now numbered 10: Goodjet, Germanwings, bmibaby, My TravelLite and Ciao Fly, established in 2002 and EasyJet, Ryanair and Buzz, Basiqair and Virgin Express, established in 2001. The market is still highly concentrated, as the two major players that are EasyJet and Ryanair hold 85% of the market.

This study confirms their progress on the french market: "While traffic produced by these companies had already increased by 51% in 2000 and 44% in 2001, sales were up 85% in 2002 compared to 2001."

"Such an increase can be explained in a market economy only by the combination of a large potential demand and a sharp increase in supply, naturally with the original product attractive."

In 2002, the supply of low-cost airlines has improved through an increase in the number of routes operated which went from 52 to 87 in 2002 (+67%) and an increase in the number of movements which have increased from 27405 to 50205 in 2002 (+ 83%). In three years the increase is consistent since traffic has quadrupled (+ 299%) since 1999.