Zakenreis.nl



Benjamin Smith, CEO Air Franc-KLM:An airline geek with ambitious plansExclusive interview published in ZAKENREIS #511, the leading business travel magazine in the Benelux.TEXT Lolke van der Heide and Manuschka HundepoolBenjamin (Ben) Smith has been CEO of Air France-KLM for eight months. From the moment he arrived, he expeditiously set out to enact his plan for the company. Smith, born in the United Kingdom, emigrated to Canada with his Australian father and mother from Hongkong when he was still young. Until now, the Canadian hardly spoke with the media. He made an exception for Zakenreis.It’s a bright spring day when we shake hands with Ben Smith (47) in his office at airport Charles de Gaulle. First he takes us to the large terrace adjacent to his workroom, with a view of the platform and, in the distance, the Eiffel Tower. “I like coming here,” he says smiling widely, “I love planes.”This can also be seen indoors, where he has a whole display of scale models, of Air France, KLM and a small Air Canada plane in the corner, his former employer. On his desk, there is a large photo of his daughter, wearing a captain’s hat.Smith calls himself an airline geek and shows us his mobile phone to illustrate this. “Every login code I have is of a different plane type. I can remember these easily, because I know exactly which planes I’ve been on during my travels.” He remembers the first KLM flight like it was yesterday. “It was from Amsterdam to New York JFK on a Boeing 747-300. I remember where I was sitting, what gate we departed from and where we arrived at JFK. At Schiphol, there was a walkway over the wing and you could enter the 747 via door 4. That was my first KLM flight.”He continues enthusiastically: “It was a very special aircraft. KLM was one of the few airlines that had a Stretched Upper Deck on the Boeing 747. Boeing’s customer code for KLM is 06. KLM was the launch customer for the 300 series, so the type was 306. KLM eventually had thirteen of these 747s in its fleet, You’ve been CEO of Air France-KLM since 17 September 2018. Why were you asked?“It was completely unexpected for me. I wasn’t planning to come to Europe at all and I’d never have thought this was an option. I lived in Canada for 43 years, I worked as a COO for the largest airline company in the country, Air Canada, and that Was going better than I had ever dared to dream. My friends and colleagues live in Canada, I expected I’d continue to work there. To become CEO of an American airline company is practically impossible as a Canadian: the CEO has to be an American citizen. That’s because all airlines in the US are obliged to be part of the US military reserve, in case that becomes necessary.”So you weren’t looking for a new job yourself? “Not at all, I thought it was a joke. There was a message on my mobile phone, of which not many people have the number, from an unknown head hunter. I had been in contact with head hunters before, usually they’d ask me whether I could recommend someone for a certain position. Or if it was about me, it would be about something I wasn’t interested in at all, like a position in the Middle East.When I called back the lady who left the message about four or five days later, she asked whether I was interested in the position of CEO at Air France-KLM, which had suddenly become available in May 2018. She indicated that there are very few people with my work experience, namely the combinations of achieving a turnaround at Air Canada and negotiating new, long-term contracts with the company’s employees.”And then?“I was totally surprised. I’m not even French-Canadian, my French is not fluent, let alone me being able to speak Dutch. The CEO of the group had always been someone with the French nationality, but apparently the shareholders had decided that this was no longer a requirement. I would be going on holiday to Europe with my family shortly after that anyway, so I offered to come by. I went to Paris and Amsterdam to talk to the selection committee, which consisted of one Dutch and two French people. It went very well, we negotiated the conditions and everything was arranged within three weeks.”Was it a difficult decision to leave everything behind in Canada? “For someone who has loved commercial aviation his whole life, it was relatively simple. When I was studying economics, it was the only thing I was interested in. Aviation has really been my one true love since I was four or five years old. Studying flight schedules was my hobby. KLM and Air France are iconic airline companies that have been around for a very long time. When I think of the airline companies I wanted to know everything about, these are at the top of my list. Unfortunately, my absolute favourite company doesn’t exist anymore, it was Pan American Airways. They started with services across the Pacific Ocean, were the first to cross the Atlantic Ocean with an American built jet plane, a Boeing 707 between New York and Paris, and were the initiator of the Boeing 747 in 1965 – so many ground-breaking events took place thanks to Pan Am. But after that, it’s KLM and Air France for me. I knew about KLM’s history, understood the position of Schiphol, knew the product and knew about the relationship with the former Northwest Airlines. I didn’t have to get into all of that, I already knew about it. Besides, I had often flown with KLM and Air France, so I had experienced the product and the atmosphere on board.”What was the reaction in Europe to your appointment?“When it first become known that I had accepted this job, there was a neutral to positive reaction in the Netherlands, but there was a fiercely negative reaction here in France. Emotions were expressed very publicly, the unions are incredibly expressive here. ‘How is it possible that a non-French citizen is going to lead our company’ people asked. And there were messages such as: ‘The day you get off the plane in Paris, we’ll welcome you with a strike’. The French weren’t even talking about the group, but about Air France, the airline. The idea that there was a group with KLM didn’t even cross many people’s minds. That was also an eye opener for me.”That French attitude must have been horrible for you.“No, the situation as it was, I saw as a challenge. That was the reason why I wanted to embark on this adventure. But there was a big risk I was facing. My biggest fear when I arrived was that I wouldn’t get a chance to at least start a conversation with the different groups of employees within the organisation. But to my pleasant surprise, this was easier than I expected in both France and the Netherlands, even though there was a labour crisis going on at Air France.”One of the reasons you were appointed at Air France-KLM is your ‘strategic experience’. Could you explain?“My first involvement in writing a transformation plan at Air Canada was eleven years ago and concerned a complete revision of the fleet composition. Air Canada arose from five different airline companies that were combined over the years, starting around 1960. So cultural differences such as those between the Netherlands and France are not new to me. You have Western Canada, were they sometimes disagree with Central Canada, and the English part of the country sometimes has trouble dealing with the French part. Air Canada is located in Montréal, which is French-speaking, and has its largest operation in the English-speaking Toronto, where most of the money is also made. So I was used to dealing with the different points of view of the staff.” Unlike your French predecessors, you did succeed in coming to an agreement with the unions at Air France. How long did that take?“Five weeks. The fact that I come from the aviation industry myself helped. During my first job as a ticket agent at the airport, 28 years ago, I was also a member of a union. I’ve held a lot of positions and so I know a lot of people, such as pilots, cabin crew and airport staff. This enables me to better understand what they do and do not like about the business, what makes their lives easier and what they think is really important. I also understand how important it is to receive relevant information about the company from internal sources rather than from the media. And lastly there must be trust between employees and management, that’s an absolute requirement.”When you arrived, the labour relations at Air France were at an all-time low.“Yes, at Air France there was zero respect, zero transparency and zero confidentiality. Employees had to get their information from the newspapers, because nobody believed each other and nobody shared anything with anyone. Trust, respect, transparency and confidentiality were the four pillars I started with. I insisted that all the unions and the entirety of management kept to those four basic principles during the negotiations. From my first day here, we really tried to stop the leaking to the press. Only then can you really have a conversation within a group, point out to people what their responsibilities are and build up trust.”Your predecessor Janaillac launched the project Trust Together in July 2016. Not a lot has become of that.“There was no trust. You can’t force it either, you have to earn it. What I was really happy with, was that the teams we negotiated with gave me the chance to actually do that. These are very experienced people, both those from the operation and those from management, they know what’s realistic and what’s not. If they feel like they’re part of the discussion, have all the information and are being involved in making decisions, it helps in making the right decisions. They love this company and the brands it stands for: Air France, KLM and Transavia. Why would they then want to damage it?”Did you not want to play Santa Clause a little bit by conceding the unions a lot?“I wouldn’t last very long in this job if I did that.”Yet the labour costs increased by 6.4% during the first quarter of 2019. “It’s important to look at what’s behind the numbers. In France, you have various labour negotiations. One is the annual, obligatory salary increase which all large companies are confronted with. This is what my predecessor held a referendum about. The unions wanted to go back six years and asked for an increase of 1-2% annually, which added up to a total of 8-12%, depending on the group in question.That wasn’t realistic, but the employees thought that they had made great sacrifices when Air France was in a bad way. Unfortunately, the labour conflict led to an expensive strike of EUR 355 million in 2018, which didn’t improve the situation. Eventually, we came to an agreement with them about a 2% increase over 2018 and 2% over 2019. That was a bitter pill to swallow for the unions, because it was many times less than what they had asked for and about the same as what they had gone on strike over previously. But it was the responsible choice to make. Moreover, the agreement brought stability for 2019, which is needed for our shareholders to invest. So knowing we had to continue, I felt comfortable with the 2%. For next year, we have been able to agree on the percentage being dependent on the company’s performance and how our rivals are performing. The reason why it’s so difficult in France, is that you have to negotiate again about this national increase every single year with four categories: pilots, cabin staff, ground staff and maintenance staff.”The pilots at Air France were the trickiest?“On top of this general salary increase, the pilots at Air France also wanted an extra 5-8% retroactively. We were able to prevent that and instead, we made the salaries equal to those at KLM. But as a company we spend more in France, because the taxes and social charges are higher than in the Netherlands.”You put an end to Joon, which was an idea of your predecessor. Why?“There was a lot of unrest about Joon among the cabin crew. The launch of Joon hadn’t improved the trust between the management and the cabin crew, and there wasn’t much trust between the two to begin with. Joon had the same pilots and ground staff as Air France, but the new cabin crew worked for much lower salaries. Besides, planes and routes were taken from Air France.To me, it was very clear: this problem won’t solve itself. So we pulled the plug on Joon, with the agreement that we would win back the cost reductions we were planning to make with Joon in a different way. We succeeded, I even think we did a little better than what it said in Joon’s business plan. Moreover, we regained the complete trust of the cabin staff and that without a salary increase.”What were you most surprised by during the first eight months?“To me, the biggest surprise was that the existence of the group was not being acknowledged. Here in France, there is the idea that Air France is the group and in the Netherlands, they also mostly think that Air France and Air France-KLM are the same thing. In short, there is no group. There are several causes. The fact that the group Air France-KLM carries the names of both airlines expresses something different than IAG, which includes British Airways Iberia and Aer Lingus, among others. Or Lufthansa Group, which not only Lufthansa, but also SWISS, Austrian and Eurowings are part of. In addition, the CEO of Air France-KLM has always had a close bond with Air France; he was also either the CEO or the chairman of Air France.”You were CEO of Air France during the first months too…“Air France was going through a labour crisis and I didn’t immediately want to burden Air France’s new CEO with this. Once most of the labour problems had been solved, we appointed Anne Rigail, an Air France veteran who has worked here for 23 years, as CEO and I withdrew from that position. That happened in the second week of December last year. But until that time, they thought in both the Netherlands and France: this new CEO is also closer to Air France, so it’s the same old story again. That’s not the case. I’m the first CEO of Air France-KLM who doesn’t have a direct, special bond with one of the two airlines. Another new thing is that the positions of CEO and chairman on the board of directors of Air France-KLM have been separated, with Anne-Marie Couderc as non-executive chairperson. This organisational structure is new for everyone. With hindsight, I think we should have explained this more clearly from the start.Once we had Anne Rigail as CEO at Air France, I was able to focus on what I was appointed for: leading the group. I noticed that there was no clarity about the way decisions were made. We had activities that definitely belonged to the group and other ones that should undoubtedly take place at both airlines. I wanted to clear these things up. After all, I’m responsible for leading the group, on behalf of all interested parties. It’s a listed company and we have shareholders – we are accountable to them. A CEO has to know how things work within the group. The very first point of attention was: what’s the organisational set-up, who does what, who makes which decisions, how does this work.”Then you focused on KLM, where everything was going very well, so why change things?“Everyone knows that the KLM model is a worldwide benchmark. Schiphol as the first real transfer airport, a global hub, partnership between the national government, the municipality, the airport and the national airline, the first transatlantic joint venture – the model works. It’s refined and has evolved every decade, nobody disputes that. The results hereof are clearly visible within the group. Things can always be improved, we’re not at the level of British Airways or SWISS yet, but we’re well on our way. Compared to the crisis at Air France, it’s true that KLM didn’t need immediate attention.”But there was resistance from the Netherlands.“There was really nothing new, the way the organisation was set up had perhaps been forgotten slightly. I provided an overview to both governments. You have a CEO, who is ultimately responsible, you have the Group Executive Committee (GEC), you have departments and you have a board of directors – not that difficult. Because we’re unique, with two airlines, we have a board of directors for Air France and a supervisory board for KLM, which play specific roles in the countries that the airlines represent. But ultimately, the most important shareholder of both airlines is the group, which owns 98% of the shares. It was necessary to say this explicitly for once. I wanted all three of the boards – of the group, of Air France and of KLM – to agree with that. It took some effort, but we succeeded. It was essential for all the key people at the top to agree. That was when the commotion in the media started, at the end of January and the beginning of February. A lot of information was misinterpreted or was simply incorrect.”You mean the unrest surrounding the reappointment of Pieter Elbers.“Exactly.”It looked like Elbers was being bypassed. He wasn’t invited to meetings with you in the Netherlands and it seemed like you wanted to replace him with someone else. That caused a lot of confusion.“The Dutch and French government are very important stakeholders, whether they own 14% or 0% of the shares. Simply because we employ so many people from both countries and because we’re such a strategically important company in both countries. It’s normal for me to maintain relations with all interested parties. Sometimes I talk to our chairperson Anne-Marie Couderc, sometimes with Anne Rigail, sometimes with Pieter Elbers. There were public questions at the time: why did I do this or that without Pieter, why did I meet the Vereniging Nederlandse Verkeersvliegers without Pieter, why was there a meeting at the French embassy without Pieter – a whole list of things. Pieter knew about most of these meetings. ‘Why don’t you shake Pieter’s hand?’ they also asked. Every time I see Pieter, we shake hands.”But one time you didn’t, and it was caught on camera. “This is actually a really funny story. That day, I shook hands with Pieter at least three times. In that specific case, when they asked us to do it in front of the camera, the cameraman was talking into his mouthpiece. It sounds like everyone can hear it, but that isn’t the case. On the other side of the room, nobody heard that. There were at least 50 journalists in the room, the sound was deafening. We were both surprised. ‘It looks as though we’re getting married,’ we said to each other jokingly. If you listen well, you can hear us say it. Afterwards, I was completely stunned when people said: ‘How could you publicly refuse to shake hands with Pieter?’ Give me a break. As if we’re a couple of two-year-olds who didn’t want to shake hands. I think some journalists wanted that to be the case, which is really disappointing. You’d have to be an idiot to publicly want to give the impression of wanting to undermine KLM and Schiphol’s contribution to the group. I don’t know anybody, no aviation analyst or strategist, who would dare to claim it’s not sensible to continue investing in this. That’s what I find strange. To help combat this misconception, Pieter and I took plenty of time t0 shake each other’s hand at the AGM in May.”KLM staff and management manned the barricades for Elbers. They supported his reappointment completely and you seemed to be against it. Surely that wasn’t just the way the news was being covered?“Whether I was at that moment for someone or not, whomever that may have been, are discussions that should not take place outside the boardroom. First of all it is admirable that a CEO, be it Pieter or Anne, has support from their staff. Such support within the organisation is surprising and needs to be cherished. There is an incredible amount of pride at KLM, I have seen. KLM staff love their airline, are proud of their Dutch heritage and have a blue heart – that is a great thing to witness. The supervisory board is not a part of that. The supervisory board chair Hans Smits accepted the petition which had been signed for Pieters reappointment, but the initiative had been started by staff, not the supervisory board.Having said that, I wish to emphasise that I as CEO of Air France-KLM am ultimately responsible for a well-functioning group. That implies that I need to know whether everyone in key positions can align themselves with my directive where decision making, responsibilities and business plans are concerned. That’s true for the Air France-KLM board, the KLM’s supervisory board, Air France’s board of directors, Pieter Elbers, Anne Rigail and the CFO Frédéric Gagey.It took two to three weeks to understand what this meant, and this was also the period in which all the hubbub took place. And of course people were talking. That’s when I said: “We’re not going any further until everyone is on the same page.” I’m not really supposed to say this outside of the boardroom, but I insisted that we were 100 percent in unanimous agreement before continuing. That meant we also needed Pieter’s commitment. If someone wasn’t committed, we wouldn’t be able to progress. Or I wasn’t meant to be in this role. It was one or the other. Only when this had been clarified, could we make any progress.”Is everyone on the same page now?“Yes.”So Pieter Elbers’ position has been guaranteed?“His contract has been extended for four years. Surely there is little else I can add to that?”When you visited the Hague, to talk about the governance of Air France-KLM amongst other things, the Dutch government was already busy with the buying of shares. “That was a surprise in hindsight.”An unpleasant one?“A shock to the system.”When did you find out about the Dutch ‘coup’ and what was your initial reaction?“I was in London at the time, we were busy doing a financial roadshow. My first reaction was: this will be a tough one to explain to the shareholders. Immediately afterwards I needed to give a presentation, but knew nothing of it, was completely unprepared. Should I cancel the meeting? Should I continue? You know, it was not something I was expecting. For me, my emotions progressed from shock, to surprise, to questioning. When from the Dutch government’s side it became clear that the motivations behind it weren’t in conflict with what we wanted to do from a business perspective I thought: this is fine.What would have been very disappointing, was if there had been a strong impact on the course of the business plan that had been drawn up. And what is precisely very reassuring, is that both governments have placed complete faith in me – they believe that I am the right person to do this. And what we want to do as a company, as a group, matches their interests. As I indicated before, I will do everything to support KLM, to keep the current model intact. This has never been something that was up for debate. I’m still shocked that anyone would think that I believe that KLM does not have a good business strategy. KLM has proven its impact on the Dutch economy for a hundred years. Just the fact that the airline and the airport work together, is a winning model. Singapore Airlines did the same thing in Singapore, Dubai copied it with Emirates. That tells you something.”Was the purchasing of shares by the Dutch state necessary?“I don’t know, I can’t speak for the Dutch state. The importance of the aviation industry, what it delivers the Netherlands, are huge. For me it is important that our shareholders support our management team and business plan.”Would you like to see the Dutch and French state sell their stakes in Air France-KLM again? “I am keen on having shareholders that share our vision and plans, regardless of who they are – that is the most important thing. I prefer shareholders who are interested in the long-term health of the group. We need large capital investments; if we buy an aircraft it is usually for a period of 20 to 25 years. We do this under the assumption that our business plan is supported by our shareholders and employees. Their contracts and careers are also bound up in this.”Delta Air Lines and China Eastern have each had a share of 8 percent in Air France-KLM for a few years now. How important are they?“The most important and most profitable market for both the group, Air France and KLM is the transatlantic market. Our partner Delta is the most successful airline in North America. Delta merged with Northwest, whilst KLM and Northwest were pioneers in aviation joint ventures. So we couldn’t wish for a better partner on the other side of the Atlantic. This joint venture works. To have Delta even more invested in the success of the group is a positive thing.”You brought three confidants with you from your previous working environment. Who are they?“They’re three people from a very special category. You can easily collectively call us the aviation geek club, the airline nerds. Benjamin Lipsey (28), my chief of staff, I met roughly ten years ago over the internet on a site for aviation fanatics, Flyer Talk. On it you can exchange information about how to maximise your frequent flyer points. Benjamin asked me if I had an internship for him, he was still at university at the time. On a site like that you can see all the messages from the past years, how people responded, how they answer questions. That gives you a good impression of what someone’s like. His first school lunch box had an Air Canada picture on it. ‘Just join us,’ I said. Ben was also my chief of staff at Air Canada, he knows me and all my quirks. And on top of that his French is better than mine. Then there’s the Australian Angus Clark (44), the executive vice president of Air France-KLM strategy. I met him 20 years ago in Australia – my father is also Australian. Clark is probably the best strategist in the aviation industry. He knows everything about fleet, engines and cabin composition, that’s really his specialty. Angus is enormously talented and incredibly trustworthy. He’s really the most well-known person of us all in the group. He’s also part of the Group Executive Committee.Oltion Carkaxhija (42), just like Ben, I took with me from Air Canada. He is vice president corporate planning. He has a financial background and his crazy idiosyncrasy is that he’s obsessed with aviation employee contracts. He’s from Albania, a formerly communist country, and started out with absolutely nothing. People usually look at him funny, aren’t too quick to believe that he is a representative of senior management. But then they soon realise that he is phenomenally knowledgeable and he is a very trustworthy person to negotiate with.When I knew I was going to be CEO of Air France-KLM, I immediately said to him: ‘Oltion, you need to come with me. We’re going through a crisis at Air France-KLM. You’ll find this one interesting.’ When I told him that Air France has 17 unions he was immediately sold. Although he’s not fluent in French, he had studied the pilot’s contracts in two days and knew the impact. Even the Dutch pilots have heard of Oltion and want to meet him.”What is the role of the CEO committee?“There was a CEO-committee before I arrived, but I adapted it somewhat. We gave Pieter Elbers and Anne Rigail the title of deputy CEO. As leaders of the two largest airlines of the group they have more and greater responsibilities compared to the other members of the Group Executive Committee. Frédéric Gagey is the CFO. This small group of four discusses the most important strategic matters and makes decisions outside of the GEC. If we can’t resolve an issue, I am the one with the final vote. The CEO committee functions as a formal consultative body and meets every week. We decided this because we are underperforming compared to IAG and Lufthansa Group and we are being threatened by the Gulf airlines. Etihad, Emirates and Qatar Airways pose a threat to our operation and our company. Because they are not airlines but rather government funded departments that have full access to our markets, in both the Netherlands and France. And their markets have nothing to offer us. Look at the Qatar emirate, there is no meaningful population there. It’s not a balanced deal. The airlines belong to the government, the airports belong to the government and the policy makers belong to the government. That makes things very simple.”In what time frame do you see the aviation group reclaiming first place?“Preferably as soon as possible. That’s the reason I was brought here after all. I had three orders of business when I started this job. The first was stabilising the labour crisis at Air France. The second was that we needed a better functioning model for governance between the two airlines and at the group level. As you have seen, this was not without its complications. I am now part of all three governing bodies: that of Air France-KLM, of Air France and of KLM. The seat on the KLM supervisory board is new, but logical. This is the level at which the important strategic decisions are made.In third place there was the formulating of a business plan, a fleet plan, a product plan, a network plan, a brand plan with targets in a matrix, in which the senior management, our employees and our customers could all find agreement. Subsequently we need to ensure that the board of directors are committed to these plans. We will set targets based on passenger transport, revenue, profit and how it will pan out. A strategic business plan that cements our short, medium and long-term goals. The fact that we haven’t launched a Trust Together #2 doesn’t mean we’re sitting around doing nothing. I’ll just be doing things differently than my predecessors. We’re not going to produce a big bang, a single huge and all-encompassing plan.Who will be drawing up these plans?“Both airlines, the GEC and the CEOs. Pieter, Anne and I will give direction. KLM has a plan for the short, medium and long term, Air France has one too. What advantage can the group lend this, where can synergy bonuses be achieved by merging these plans, and what does not need to happen (yet): those are the questions I ask. How do we prevent the Gulf carriers and low-cost airlines like easyJet and Ryanair from impacting our profitability.”Why are your concrete plans only being introduced in November?“Besides our staff, which is of course our biggest asset, the fleet composition is the next issue. We want to draw up a definitive fleet plan. That’s not a month’s work, we need to fully understand what direction we are going to go. What do we do with the A380, the A350, the Boeing 787? What do we do with the cabin’s interior? These decisions, which go hand in hand with hefty investments, largely determine the opinions of financial analysts. On the financial investors day in November we will provide an explanation. It takes time to refine these plans and get support from all interested parties. The separate issues will be tackled in phases.The timing has nothing to do with KLM’s 100th anniversary on 7 October?“No. I hope that the third quarter is amazing, so we can celebrate two things.”Will you be there in the Netherlands?“We don’t have any details of who will be where yet, but it is amazing that our KLM is turning 100, the oldest airline in the world. The brand KLM has really meant something to so many people in the past century, there’s not another airline that can rival it.”Will the KLM brand continue to exist?“Of course. For at least as long as I’m still here and hopefully for another 100 years.”And the brand Transavia?“Yes. First of all Transavia has a long history with the Netherlands and a long history at KLM. KLM bought Transavia almost thirty years ago. In 2007 the operation in France was added. So we have two Air Operator’s Certificates (AOCs), one in the Netherlands and one here in France, the same brand and the same website. I’m not planning to merge the two organisations, they will continue to operate independently. But we do need someone representing the brand Transavia at the highest level.”Do you think that’s necessary?“Yes. If we want to expand, we need to make sure the brand is well positioned, so we can stay ahead of the competition. EasyJet, Ryanair and Vueling all have separate bases in Europe, but they do have someone to head their brand. So I would also like to appoint someone who is the head of the Transavia brand, whether it be in the CEO committee or a level below it, depending on the expertise of the person concerned. But I want someone from Transavia at the table. At the moment we have no one who represents Transavia’s voice at the senior level and that’s no good for an airline with a fleet of 70 aircraft.”Should that person be Dutch, French or Canadian?Smith laughs: “Or perhaps Irish or Brazilian – I have no clue whatsoever. I don’t understand that discussion very well, we are an international airline group. Sometimes I read stories about four French people in a committee and only three Dutch people. We now have a Canadian and an Australian extra – on what side are we supposed to be sitting? It’s also funny that some people think I’m French. I will happily show my Canadian passport. It’s still a sensitive issue for some people and I try to avoid that discussion. Air France-KLM has 84,000 employees and generates 25 billion euros in revenue. We are a worldwide airline with 318 destinations and we transport 100 million customers a year. Our most important brands are Air France, KLM and Transavia. We need to move forwards, it didn’t only just become Air France-KLM last year. In this time we need to decide based on someone’s capacity or service whether we give him or her an important position, not based on which country they were born in.”Looking back on all the commotion in the Netherlands, would you have done certain things differently? “A couple of things surprised me at least. I probably underestimated the amount of confidential information that would appear in public. I don’t know whether I could have prevented that, but it surprised me. You’re in a big company and you assume you can talk freely. You don’t expect the things you say to appear on the front page of the newspaper the next day. Besides, we had decided that we wouldn’t comment, because we didn’t want to prematurely share any confidential information. That was very uncomfortable to deal with, because we weren’t able to correct any fake news that was being reported either.Secondly, I was surprised about the fear in the Netherlands about the KLM brand being damaged or disappearing. Or that I didn’t support KLM’s business model, which would maybe cause KLM’s role in the Netherlands to be reduced and become less relevant and less important.I can’t repeat it enough: we’re not changing the KLM model, the model works. That doesn’t mean we can rest on our laurels. Compared to the level of British Airways and Swiss, there is still a lot to be gained. Like every company, we’ll have to keep moving.”Are cost reductions within Air France a priority?“Always, that will never go away. It’s not a one-time thing. The costs at neither of the airlines are, by the way.In the past, measures to maximise profits have mainly turned out well for KLM. If you look at the average revenue and profit of when the two airlines were combined and compare them to now, KLM hit a homerun, nobody can deny that. But without the joint sales, marketing and revenue management with Air France, that would not have been possible for KLM. As an independent airline company, KLM could not have increased its revenue from EUR 6.4 billion in 2004 to EUR 10.3 billion in 2018.If we would move Air France’s operations to the Netherlands, we would save EUR 700 million to EUR 1 billion worth of taxes and social charges. Air France would in one fell swoop be back in business. But it doesn’t work that way.”There was a rumour that you wanted to turn KLM into a low cost carrier and make Air France the group’s premium brand.“That’s 100% incorrect. On certain flights, there is a disproportionate number of customers who are willing to pay for La Première, Air France’s first class. This is a market that is unique to Paris – routes like Tokyo and New York are good examples of where we see this demand. We have to cherish that in selected markets, because these high-yield passengers generate a lot of money for us. But we’re not introducing a new product, it’s already there. Of Air France’s 107 widebody aircraft, a quarter has La Première on board. When the market demands more or less of it, we can adjust.KLM ceased its first class years ago, because there’s no demand for it in the Dutch market. France and the Netherlands are different markets, with different products. For example, KLM has an economy comfort seat with more legroom and is sold as an ancillary product, whereas Air France has a premium economy class with extra legroom and broader seats. Some products on the other hand are very similar, like the business class seats on the Boeing 787.”What will be the biggest changes in the near future?“We need more reserves as a group, more income – that’s certain. We need a fleet plan and a product innovation plan. We have to make sure our brands stay relevant to future customers, that we’re leaders, not followers. Now that a number of difficult things are behind us, we have to get to work. We’re going to make Air France-KLM the leading airline group in Europe again. I strongly believe in the future of Air France-KLM and I’m hoping to be able to stay for a long time. Photo’s: ? Natascha Libbert and Air France-KLM ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download