AF Creates ULCC Temp Brand "Boost"

At its investor day on 12-May-2017, Air France-KLM gave an update on plans for a new "lower" cost airline (project name 'Boost') alongside Air France at Paris CDG. It hopes Boost can regain market share, particularly from Gulf airlines, on loss making 'ultra competitive routes' that combine both business and leisure. If successful, Boost should allow Air France to return to growth.
The new airline aims to launch in winter 2017 and to operate 28 aircraft (10 long haul and 18 medium haul) by summer 2020. It will use Air France pilots, but its ex fuel unit cost target is 15% to 18% below that of Air France – mainly from a new cabin crew agreement and savings in areas such as catering and station activities. Further unit cost savings are anticipated when Boost's long haul fleet switches from A340s to A350s, from winter 2019.

Air France-KLM has not yet announced a brand name for the new airline, but says it will be positioned towards 'millennials' as a market segment. The Boost airline will also be Air France-KLM's digital laboratory, but this stops short of the dedicated digital innovation incubator/accelerator programmes of leading European competitors. A final agreement with pilots remains on the critical path to the launch of Boost.



The Air France brand is unprofitable on 35 percent of its routes, with 10 percent involving “heavy” losses, Janaillac said in November while unveiling the Boost project. His announced goal was 20 percent lower costs at Boost than at Air France’s mainline operations. Still, it’s unclear exactly how Boost, which is focused on boosting margins, will woo customers. The CEO said at the time that any spending reductions wouldn’t be passed on to consumers, so the unit wouldn’t be a “low-fare” carrier competing on price.

“Certainly the yes vote is better than the alternative, though given how much management had already compromised on the initial plan, it’s not a huge surprise,” said Gerald Khoo, an analyst at Liberum Capital with a sell recommendation on the airline’s shares. The Boost project doesn’t go far enough to “immediately transform the fortunes of Air France,” he said.

Boost is looking at hiring new flight attendants who’d be paid 40 percent less than cabin crews at Air France’s main network. That could still set the stage for a conflict after flight attendants’ representatives called the proposal “scandalous.”

The cockpit crews’ approval follows Air France’s climbdown on an earlier proposal to cut pilot compensation by 15 percent at the Boost unit. Earlier this month, management said it would instead ask pilots across all of Air France to shoulder the burden by taking a 1.5 percent wage reduction. Employees have yet to vote on that plan.