Air Transport World

'The target is not to be the biggest but to be the most profitable': Air France emerged as Europe's most profitable major airline last year--will it be satisfied with being Europe's second-largest airline as well? (Profile).(Statistical Data Included)

The last Frenchman to lead Europe really didn't have to worry too much about profits as long as his market share stayed up. Air France Chairman and CEO Jean-Cyril Spinetta, alas, does not have that luxury, especially with the French government committed to becoming a minority shareholder. All the better that he has managed to keep the black ink flowing even as he has presided over a Napoleonic expansion that has seen Air France cannon past Lufthansa to challenge British Airways as Europe's largest passenger airline in terms of traffic.

But can Spinetta, who recently was reappointed for a second five-year term, maintain profitability and continue to grow the airline? And is his secret--or not-so-secret--ambition to put AF on top of Europe, surpassing even BA? The 59-year old Spinetta laughs. "No," he responds lightheartedly, although not too convincingly. "When you're young, it's your ambition to be the number one. Not for an old man like me.

He ponders for a minute. "Let me rephrase: For a company like Air France the target is not to be the biggest but to be the most profitable. I prefer to be smaller and more profitable than bigger and less profitable." Is he prepared to shrink AF's market share if it would improve profits? "Yes, of course. But if I can improve my profits by extending my market share, evidently I will extend my market share."

And this is the strategy that Spinetta believes is the right one for Air France at present. "Because of the specific assets we have, especially the possibility we have to expand at [Paris Charles de Gaulle] Roissy, which has available slots thanks to the four runways, we have to extend our market share. Having a shrinking policy, and not using this opportunity, would be plain stupid. Others will come and rake up the slots. And that would not be good for Air France."

In any case, Spinetta is not satisfied with the company's financial performance in the year to last March 31. "A net profit of [euro]153 million on a turnover of [euro]12.5 billion is a poor result," he notes dryly. "Of course, if you compare it with other majors, it is one of the best results worldwide and the best in Europe. But nobody can be satisfied with a profitability of 1.3% on turnover. It's clearly insufficient. So yes, we did better than the others, but it is an absolute bad set of results."

Air France remained in the black in the first quarter of the current financial year as well, reporting income of [euro]159 million in the three months to last June 30. This was 18.5% down on the year-ago period, when the airline earned [euro]195 million, but still a positive outcome given the environment. Operating revenues for the period were down only 1.7% at [euro]3.31 billion, but operating costs dropped only 0.5%, resulting in lower operating income, down 22.1% before aircraft disposals. For an airline, the balance sheet is solid, with net debt at year end of [euro]2.9 billion versus equity of nearly [euro]4 billion. …

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