Air France-KLM Turns to New Global Marketing Strategies

Air France-KLM, Europe´s largest airline, said it was achieving cost benefits from the co-ordination of its international sales and station organizations abroad faster than forecast.

Patrick Alexandre, executive vice-president international commercial affairs and operations at Air France, said the savings in international markets for the combined group in its sales and foreign stations were forecast to total 92m euros ($119m) within four years. This would account for more than 15 per cent of the total 580m synergy benefits forecast for the whole group from the merger.

The takeover of KLM, the Dutch flag carrier, by Air France last year was a pioneering step in the consolidation of the fragmented European airline sector, and has been followed by the announcement of Lufthansa´s planned acquisition of Swiss International Air Lines.

The combined Air France-KLM has 225 international destinations, 107 long-haul and 198 short-haul, with the international operations accounting for 58 per cent of total passenger revenues.

While merging at shareholder level and consolidating financial reporting, Air France-KLM has continued to pursue a strategy of ´´one group, two airlines´´ by maintaining separate brands and fleet operations.

A large part of the synergy benefits is planned to come from increased revenues generated by the combination of the two groups´ global networks, centered on its twin hubs at Paris Charles de Gaulle and Amsterdam Schiphol airports.

Around the world it is seeking to save costs by coordinating sales strategies on international routes and by rationalizing its presence at international destinations. Mr. Alexandre said the biggest savings had come from the joint procurement of services, such as passenger and baggage handling and catering.

Wherever possible the two airlines are seeking to rent offices and ticket offices jointly and to renegotiate station handling services.

Synergy benefits in the first year to March 31 2005 in international commercial affairs had totaled 8.3m, up from the 7m originally forecast, while the forecast for cumulative annual savings after four years had been raised from 78m to 92m, said Mr. Alexandre.

The airline has grouped together 16 local and regional management around the world at destinations ranging from Copenhagen to Manila, Frankfurt, Singapore, Tokyo and Tehran.