Skift Take
Air France-KLM has been content with the status quo for a long time. Under new CEO Ben Smith, that's changing. But is it too much change, too fast?
Since Air France and KLM merged in 2004 to create what was then the world's largest carrier by revenue, a series of CEOs has tried to keep the peace in Paris and Amsterdam. These executives allowed managers in each country to operate the carriers as they pleased while begging French unions to accept any deal that might make the company more competitive with EasyJet, Ryanair, and other low-cost carriers.
But the current CEO, Ben Smith, arrived a year ago with a different mandate. Yes, he wants to make stakeholders happy, including employees and the two national governments. Yet Smith also wants to shake the malaise that has made Air France-KLM the worst-performing of Europe's major airline groups, despite the storied history of both carriers.
"The main challenge going forward is, how do we get our brands to the top of the industry?" Smith said in a telephone interview.
KLM is not so far away. The Dutch airline was in rough financial shape before it merged with Air France, but since then it has thrived, leveraging its central hub in Amsterdam to attract lucrative connecting passengers from all over the world. Air France is a different matter, with the airline long crippled by labor issues, an inconsistent product, and an inefficient fleet, including 10 Airbus A380s it does not need.
Smith, who was chief operating officer at Air Canada, is trying to meld the company into a more cohesive group that can better compete across Europe. He's had some successes, including with Air France labor unions, but he has also run into challenges. After reports in February indicated he wanted to force out KLM's CEO, the Dutch government quietly amassed a 14 percent stake in the company to increase its leverage. The CEO, Pieter Elbers, remained.
Smith will speak Sept.18–19 at Skift Global Forum in New York City. We recently spoke with him to preview the discussion.
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