Air France Says 60% of Customers Opting for Discount Fare

Air France (AF) said 60 percent of passengers on short-haul services where there’s a choice of paying less in exchange for fewer perks are taking up the offer.

The Mini option, added on 58 routes from Feb. 6, cuts fares by 20 euros ($26) for people willing to travel without checked bags and give up rights to frequent-flier miles. Take-up has been such that the model will be rolled out across all 139 European and North African services, Air France said last week.

“The feedback we had from customers was good,” Emmanuelle Gailland, Air France’s vice president of operational marketing, said in a telephone interview. “We had a feeling that on short and medium routes many customers had a need for this.”

Air France-KLM Group, Europe’s biggest airline, is offering reduced fares as part of a wider short-haul restructuring aimed at stemming loses and protecting market share against low-frills competitors including EasyJet Plc (EZJ) and Ryanair Holdings Plc. (RYA) With the discounts -- which are only available if booked at least 40 days in advance -- tickets will sell from as little as 49 euros.

Air France said the three-fifths take-up rate is for those passengers eligible for the Mini, which isn’t an option for people requiring flexible travel or who subscribe to a program that trims fares in exchange for an upfront annual payment.

Flying Fuller

Alexia Dogani, an analyst at Liberum Capital Ltd. in London, said the risk of Air France cannibalizing fares by offering discounts to customers who would fly with the company anyway is outweighed by the likelihood of fuller planes allowing it to raise prices for people who book near the date of travel.

“By reducing the starting fare to compete with carriers like EasyJet, Air France is building the load factor earlier, so when they get to, say, 65 percent occupancy a week before travel they can push fares quite high for business passengers,” said Dogani, who has a “buy” recommendation on Air France-KLM stock.

Gailland said it’s too early for Paris-based Air France to provide figures on changes in occupancy rates and average fares -- or yields -- on the Mini routes, adding that there are no plans to charge for snacks and drinks on the flights.

“In customer surveys, passengers said ‘we’re interested, but at the same time we expect Air France to offer basic services,’” she said. People who book a Mini fare can still opt to check a bag should they need to on payment of an extra fee.

Regional Strategy

While the Mini service is being introduced on routes flown by single-aisle airliners, Air France has a different strategy for its regional services, which employ smaller aircraft and tend to be used more by business travelers, creating a new unit, Hop!, to merges its Brit Air, Regional and Airlinair operations.

Passengers flying with the new brand, which operates 98 planes with 48 to 100 seats, have a choice of Basic, Basic Plus and MaxiFlex fare options starting at 55 euros. Whatever the fare, they can check in one bag and qualify for a free snack and a drink on board

The company is separately seeking to sell its other regional arm, CityJet, the No. 1 carrier at London City airport, with Intro Aviation GmbH of Germany and Dublin-based ASL Aviation Group Ltd. among the final bidders.

Air France-KLM narrowed its loss to 300 million euros from 353 million euros last year after cutting jobs and reining in capacity. It has said changes in fuel prices, the economy and world trade have the potential to derail the recovery this year.

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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