Air France-KLM is creating a new long-haul airline to win back market share from Gulf carriers such as Emirates and Etihad.
The new company will focus on “ultra-competitive” markets with plans to open up new routes and re-open those closed due to lack of profitability.
It aims to have 10 long-haul aircraft by 2020 with 30 per cent of operations on new routes.
The new brand does not have a name yet, but Air France plans for it to offer economy and business classes.
To compete with lower-cost rivals, its pilots and crew will be employed on different terms from the main company. “The company will operate with Air France pilots on a volunteer basis at work conditions adapted to its competitive positioning,” the airline said in a statement. “For cabin crews, an independent career path will be created to enable this new company to be operated at the level of market costs.”
Air France has a history of long-running disputes with unions over any changes to working conditions. Action earlier this year saw the 43rd strike day since 2009 and one two-day strike saw more than 1,000 flights cancelled. And last month, Air France CEO Frederic Gagey stepped aside in a bid to improve relations between the airline and powerful trade unions.
Air France-KLM boss Jean-Marc Janaillac said the group must “fight back” and adopt an “offensive mindset” to win back customers.
“We shall be fighting back on every front,” said Janaillac. “Our strength lies in the fact that we are challengers.
The status quo is not an option. We must launch a new dynamic to return to a leadership position in our markets.”
The announcement followed the publication of the group’s financial results which showed revenue fell 5.1 per cent in the third quarter of 2016 and down 3.5 per cent for the year to $20.81 billion. It also announced that pilot and cabin crew strikes have cost the company $144 million this year.