Air France-KLM Group to start new long-haul airline

Air France-KLM Group plans to start a new long-haul airline to fight competition from Persian Gulf rivals and cut back on short-haul plans as new chief executive officer Jean-Marc Janaillac looks to revive a company weakened by internal divisions even as it struggles with a shrinking market share.

The group will set up a French arm parallel to Air France aimed at turning a profit in ''ultra-competitive'' long-haul markets, Janaillac said Thursday.

The project, known as Boost for now, ''will not be low cost'' and will draw pilots from Air France on a voluntary basis while flight attendants would be hired from external sources. The unit would get 10 planes by 2020, with new routes making up a third of its flights.

The group's European point-to-point flights would operate only under the Hop! and Transavia brands as of next year, while the Air France and KLM names would be reserved for network operations.

Janaillac's nine-point business strategy also includes increasing annual revenue about 10 per cent to €28 billion ($31 billion) by 2020 and cutting costs by more than 1.5 per cent. This comes in response to  long-haul competition from low-cost European carriers such as Norwegian Air Shuttle ASA as an increasing number of Gulf airlines including Dubai-based Emirates. The CEO sought to balance operational changes with demands from labour unions that had led to profit-sapping strikes in recent years.

''We shall be fighting back on every front,'' Janaillac said in his first major strategy statement since taking charge in July from predecessor Alexandre de Juniac. ''The status quo is not an option,'' Bloomberg reported.

''It will be focused on ultra-competitive markets and will enable (Air France-KLM) to go on the offensive by opening new routes, re-opening routes closed due to their lack of profitability and maintaining routes under threat,'' Air France-KLM said in a statement.

''This new company will propose a simple, modern and innovative offer, whose positioning will not be low cost,'' Air France-KLM said. ''It will offer its customers business and leisure destinations with standards comparable to those of Air France in terms of product quality and the professionalism of the crews.''