We are publishing excerpts from an interview published in the French daily newspapers Le Monde issue of May 20th 2011 and Air France news portal of Pierre Henri Gourgeon, Air France’s CEO. The interview follows the group announcing it had realized a 122 million euros ($174 million) profit for the 2010-2011 fiscal year ended March 31st 2011, reversing 1.3 billion euros ($1.85 billion) lost a year before.
The 65-years old Aeronautics Engineer became Air France CEO in January 2009 after serving as Deputy CEO from June 2004. He is likely to remain at that post through 2015 pending confirmation at the next board meeting on July 7th, 2011. The 122 million euros profit just announced by the Air France-KLM Group is a big turn around from the 1.3 billion euros lost in 2009-2010. His latest ‘Embark’ strategy will focus on security of flights and attention to customers needs. He hopes to be able to further reduce the Group’s debt ratio which went from 1.15 in March 2010 to 0.85 currently (the target is 0.5 within 3 years). Better process integration across KLM and Air France remain a big objective; finance, accounting, IT, and streamlining wherever redundancies remain from the 2004 merger.
The 2009 turn-around plan is now set to generate up to 1.4 billion euros ($2 billion) in savings (900 millions euro-$1.28 billion were expected); better offerings on European flights and strong products on the long haul have been introduced. The cargo business did turn around positively a year ahead of planned. Labor reductions contributed 600 millions euros ($855 million) in savings. Interestingly enough he reveals that fuel cost makes 20% of medium haul fare and a third of long haul’s.
The so-called provincial bases (Marseille debuts October 2nd 2010 plus 3 others in 2012) could generate cost savings of 15% which coupled to higher aircraft utilization and flexible personnel schedules (more flying hours in fewer days) would create the foundations for a low cost operating infrastructure.
The long haul North Atlantic sector will see stronger joint ventures and a re-invigorated Sky-Team alliance. Thanks to a deeper network in the Chinese market, the CEO claims being immune from the competition from the Gulf carrier.