Luxury air travel soaring to new heights

Keen competition in the luxury air travel segment is seeing an 'arms race' in first class flight, with big commercial airlines overhauling their premium products to expand their suite of offerings. Meanwhile, industry watchers have said private jet travel is also taking off for short-haul flights around the region.

Earlier in November, Air France launched its new first class 'La Premiere' suites in Singapore.

Four individual suites of about three square metres each are on board 19 of the airline's Boeing 777-300 fleet, and they will be available on daily flights between Singapore and Paris by the middle of Jan 2015.

Mr Nicolas Ricard, Country Manager Singapore, Air France-KLM said: "Luxury air travel demand is growing in Asia. This is a target for Air France. Air France is undergoing significant transformation with an investment of €500 million in upgrading all the long haul products, and services. This is not only La Premiere suite, but also other cabins."

In May, Middle Eastern airline Etihad unveiled its new first class suite, the Residence, which will feature a living room, double bedroom and ensuite shower room.

Also within the past month, British Airways announced that it has added Singapore as its fifth destination in its network of A380 service routes from London. The move is part of a £5 billion investment the carrier has made in the last two years to upgrade its products and services.

Mr Robert Williams, Regional General Manager, Southeast Asia, British Airways, said: "The A380 allows us to offer even more space to first class customers than they are already enjoying on the other air craft in the fleet. They have 30 per cent more space in their seat, 60 per cent more personal storage.”

“We maintain Singapore in Southeast Asia as a hub down to Australia as part of the traditional kangaroo routes between Europe and Australia. Those stories demonstrate our commitment to SEA and what we're doing in this market," he added.

DEMAND FOR LUXURY AIR TRAVEL DEPRESSED: ANALYSTS

Despite the 'arms race', aviation analysts said demand for luxury air travel is currently somewhat depressed. According to statistics from the International Air Transport Association (IATA), first and business class travel within Asia contracted around two per cent in September, compared to a year ago.

IATA said overall traffic growth within Asia has expanded only 0.2 per cent during the first three quarters of 2014, compared to the same period in 2013. The slowdown has been related to notable declines in international travel for Thailand and Malaysia, due to geopolitical events and weakness in the Chinese economy.

Internationally, current performance for premium travel is relatively weak, growing by 2.3 per cent year-on-year in September, compared to the overall rate of increase of 3.7 per cent during the first three quarters of 2014.

Changi Airport Group said about 10 per cent of passengers fly on first and business class.

Mr Greg Waldron, Asia Managing Editor, Flightglobal said: "These products tend to be very sensitive to economic issues. So for example, in a weak economy, you might get people trading down from first class to business, and from business class to economy. And certain things have also depressed first class travel recently - the crackdown on corruption in China, that has seen a reduction in some first class usage."

GROWING DEMAND FOR PRIVATE JETS FOR SHORT HAUL FLIGHTS

While airlines largely offer a product for long-haul travel, many do not have a first class cabin for short-haul flights. Instead, aviation analysts said there is a growing demand for private jet chartering for regional travel. Industry players have also said supply is on the rise.

It is estimated that there are more than 30 private jets based in Singapore, up from just about 10 aircraft five years ago. About half of these are available for charter.

Mr Stefan Woods, Sales Director, Singapore Air Charter said: "What that's done is it has brought the price down for the consumer, which is a good thing. A lot of our clients locally are local businesses that use our services as a tool.”

“It's not a luxury at all. It's a necessity to go to some places that the airlines don't service, or they service infrequently. Sometimes airlines don't have business class on board, and it's not as flexible as having a private jet,” he said.

Mr Woods also said first class passengers on ultra-long-haul flights often arrive in Singapore and head straight to a private jet to a destination in the region.

According to Changi Airport Group, business aircraft movements at Seletar Airport have grown at an average annual rate of almost 20 per cent from 2009 to 2013.

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Air France estimates strike cost at US$632m

Struggling French flag carrier Air France on Wednesday (Oct 8) said last month's two-week strike would have an impact of around €500 million (US$632 million) on its bottom line for this year.

Taking into account the lost revenue during the strike and the knock-on impact of disgruntled passengers staying away in future, the impact over 2014 will be "in the order of €500 million", said financial director Pierre-Francois Riolacci. "We need a few more days to finalise completely our estimates. But we think the impact on the third quarter will be in a range of €320 to €350 million," Riolacci said.

He warned the knock-on consequences were harder to put a figure on but said there would be an impact both on the last quarter of the year and the first part of next year as Air France, Europe's second-largest airline, battles to win back its reputation.

"We made some savings (like in aviation fuel) because the planes were not flying," he noted. "On the other hand, we had additional costs: putting passengers up, compensation or buying tickets from our competitors for some of our passengers, which we did not always get at the best price," he said.

Pilots at Air France waged the longest strike in the company's history between Sep 15 and 28 in protest at the group's plans to expand its low-cost subsidiary Transavia France. The airline sees the development of Transavia France as crucial to compete in the cut-throat world of aviation which has been revolutionised by the arrival of low-cost operators like easyJet and Ryanair.

But the pilots, some of whom earn up to €250,000 per year, were worried their flights could be replaced by Transavia services or that the company would seek to use the cheaper Transavia pilots.

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Air France pilots end record strike

Air France's main pilots' union Sunday (Sep 28) ended the longest strike in the carrier's history to allow "calmer" talks to go ahead over the contentious issue of the airline's low-cost subsidiary Transavia.

A spokesman for the SNPL union, Guillaume Schmid, told AFP the pilots were ending the protest - which has cost Air France more than 200 million euros (S$323 million) over the past two weeks - so that the negotiations over Transavia can proceed.

Air France sees Transavia's development as vital in the struggle to retain market share in the cutthroat medium-haul sector, which is steadily being overrun by no-frills airlines such as easyJet and Ryanair. But Air France pilots, who earn up to 250,000 euros a year, fear some of their flights will be replaced with services operated by Transavia, or their contracts will be squeezed by the expansion of the subsidiary.

Immediately after the pilots' union announced the end of the strike, French Prime Minister Manuel Valls called on all sides to "regain the confidence of everyone and resume the development of Air France and its subsidiary Transavia, which is an asset". Valls said the 14-day strike was "misunderstood and penalised passengers, the company and the country's economy".

The protest saw half of Air France's fleet grounded, and cost the airline between 15 million and 20 million euros a day. Thousands of passengers had travel plans disrupted.

TALKS DEADLOCKED

On Friday, Valls ruled out a proposal by the pilots to lift the strike if an independent mediator was named to run the thorny negotiations. Talks over the issue have been deadlocked. The latest round, which ended early Sunday, "did not suit us," Schmid said. But he said the decision had been taken to lift the protest to allow discussions "in a calmer climate".

The pilots are fighting for a "single contract" across Air France-KLM and its subsidiaries to avoid being forced to accept less attractive working conditions at Transavia, which serves holiday destinations across Europe and the Mediterranean. A Transavia captain earns up to 160,000 euros a year but clocks up significantly more flights than one flying for Air France. Co-pilots on both airlines earn roughly the same amount at the beginning of their careers, according to sources.

The French state holds a 16 per cent stake in Air France-KLM, the second-largest European carrier after Germany's Lufthansa. Air France's share price plunged nearly 15 per cent since the stoppage began and the protest fuelled wide concern in France.

The strike was "catastrophic for the French aviation sector," a joint statement from key industry unions, including those representing travel operators, had warned. "In a more-than-morose economic context, it is compromising a future that is already seriously under threat," read the statement.

Air France has already implemented an ambitious restructuring plan to reduce costs and improve efficiency.

While the Air France management agreed to scrap the development of Transavia abroad, it has vowed to maintain at least some part of its plans to enter the low-cost market.

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Union makes offer to end marathon Air France strike

Air France's main pilots' union offered to lift its crippling strike late Friday (Sep 26) if an independent mediator was named to run negotiations in a bitter battle over the fate of the company's low-cost subsidiary.

The SNPL union, in what it called a "gesture of appeasement", said it was "ready to end the conflict as soon as this mediator is named" by the government. The French prime minister's office told AFP there were "no grounds for new negotiations with a mediator".

Over half of Air France's planes were grounded for the 12th day running, and the strike was extended until at least Tuesday, after pilots blocked the most recent management proposals to scale back development plans for its low-cost Transavia airline.

The strike at Europe's second-largest flag carrier is costing an estimated €15 million to €20 million (US$19 million to US$25 million) a day. Prime Minister Manuel Valls on Friday renewed his call for the "unbearable" strike to end. Air France's share price has fallen nearly 15 per cent since the stoppage began. "This strike is catastrophic for the French aviation sector," read a joint statement from key industry unions, including those representing travel operators. "In a more-than-morose economic context, it is compromising a future that is already seriously under threat," read the statement.

Air France's management also rejected the idea of a mediator, and voiced surprise that pilots' representatives had left the negotiating table on Friday while "discussions were going well". "We aren't far from a solution," said spokesman Eric Schramm. He stressed however that the company was in an "extremely delicate" situation, losing €20 million each day of the strike.

The protracted strike, and fruitless negotiations, have also prompted anger among aviation staff grounded alongside their planes, around 200 of whom protested against the stoppage on Friday.

CONCESSIONS NOT ENOUGH

A concession from management to scrap plans to expand Transavia further into Europe was "necessary, but not enough" to stop the strike, SNPL spokesman Guillaume Schmid said on Friday. Schmid later called on the government to name an "independent mediator as quickly as possible". He blasted Air France-KLM chief executive Alexandre de Juniac for "his inability to carry out a respectful dialogue" with the unions.

The pilots are fighting for a "single contract" across Air France-KLM's subsidiaries to avoid being forced to accept less attractive working conditions at Transavia. Transavia currently serves holiday destinations across Europe and the Mediterranean.

Air France pilots, who earn up to €250,000 a year, fear some flights will be replaced with services operated by Transavia. They fear they will end up earning less and having shorter recovery times between flights. A Transavia captain earns up to €160,000 a year, although co-pilots on both airlines will earn roughly the same amount as each other at the beginning of their careers, according to sources.

LOW-COST A GROWTH OPPORTUNITY

While Air France management agreed to scrap the development of Transavia abroad, it has vowed to maintain at least some part of its plans to enter the low-cost market, a key "growth opportunity", according to de Juniac. The Air France-KLM board of directors has thrown its support behind management.

The withdrawal of plans to expand Transavia will come as a blow to the airline's efforts to be more competitive in the crowded and changing European skies, increasingly dominated by no-frills operators such as Irish airline Ryanair.

France's MEDEF employers' association said on Thursday the conflict at Air France - which is 16 per cent state-owned - encapsulated the malaise gripping the country's crisis-hit economy. The union action is "again dragging a company into the red", said MEDEF vice-president Jean-Francois Pillard. "For those who want to invest or travel in France, this does not contribute, at an already extremely difficult time, to improving the image of the country," he said.

Air France has already implemented an ambitious restructuring plan to reduce costs and improve efficiency. "Low-cost airlines now represent between 25 and 45 per cent of air traffic in Europe, depending on the country," said Didier Brechemier, an aviation expert at consultants Roland Berger.

Ryanair will soon expand its fleet to 400, which would take it above Air France's 350 aircraft. "With competitors like that it's not hard to see why Ryanair is the fastest-growing airline in Europe," company boss Michael O'Leary said dismissively of Air France's offer to put its expansion plans on ice.

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Pilots reject Air France offer to end strike

Air France pilots on Monday (Sep 22) rejected a last-ditch management attempt to end the longest strike at the airline since 1998 that is costing up to €20 million (US$25.7 million) every day.

The main pilots' union dismissed as a "smoke screen" the chief executive's offer to freeze the development of a subsidiary budget airline that management sees as vital to compete in the cut-throat aviation market. The management proposal "is nothing but a smoke screen that offers no more guarantees than previous offers and does not solve any problem," the SNPL union said in a statement.

Air France chief executive Alexandre de Juniac said earlier on Monday that this was the "last offer" to break the deadlock that has grounded on average 60 per cent of the French flag carrier's fleet.

The pilots are on strike in protest at the airline's plans to develop Transavia France, which serves holiday destinations, primarily in the Mediterranean. They fear the airline will attempt to replace expensive Air France pilots, who can earn up to €250,000 (YS$321,000) a year, with Transavia pilots, who are paid considerably less.

De Juniac offered "to suspend the plan to create Transavia subsidiaries in Europe until the end of the year" in order to have "a deeper dialogue" with pilots, but insisted the overall project could not be called into question.

Air France said the strike was costing them "up to €20 million per day" and said it would update its profit forecasts when the strike was over. "The pilots' strike has had disastrous consequences for customers, employees and the company's finances," the airline said in a statement.

Unions have threatened to extend the strike - already the longest in 16 years - until Friday unless their demands are met.

AIR FRANCE FATE 'AT STAKE'

Air France has made concessions - notably an offer to limit the Transavia fleet to 30 planes compared with 37 originally planned - but to no avail so far.

"This strike is becoming interminable," said Jean-Claude Delarue, president of a travellers' federation. "You have to ask yourself whether Air France will end up losing market share because travellers will end up going elsewhere," said Delarue.

The government has called several times for an end to the strike, with Prime Minister Manuel Valls warning that the image of the eurozone's second largest economy was at risk. Transport Minister Alain Vidalies warned over the weekend that "the fate of the company could be at stake". "The low cost (arena) is not a choice, it's an obligatory move, that's reality. I think pilots are fully aware of this," he told French radio.

Management has sent an email to its pilots to try to put an end to what it said were attempts of "intimidation" against pilots who were continuing to work. "Air France management will not tolerate any misdemeanour and will initiate steps necessary to punish those who engage in such acts," read the email, obtained by AFP.

The company also wrote to its passengers to express its "frustration" and "unhappiness". It asked customers who have booked a ticket before September 26 to delay their trip or change their flight free of charge.

In an apologetic message to its frequent flyers, the wider Air France-KLM group has said its aim was to offer "competitive" fares and Transavia was meant to complement Air France's operations without creating any "adverse impact on Air France staff".

Throughout the strike, the atmosphere at airports has been remarkably quiet, as the company has been warning travellers in advance that their flights are cancelled.

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Air France-KLM sees lower profit on over-capacity, weak cargo

Air France-KLM on Tuesday slashed its earnings forecast for 2014, hit by over-capacity in traditionally lucrative long-haul routes and persistently weak cargo demand.

Europe's second biggest airline after Lufthansa said earnings before tax, depreciation and amortisation for the full year would now reach around 2.2 billion and 2.3 billion euros ($3.0 billion and $3.1 billion), rather than 2.5 billion euros previously forecasted.

In its monthly traffic update, the airline said passenger numbers rose by 2.9 per cent in June, but yields did not keep pace as intense competition held ticket prices down.

"While not representing a turning point in market trends, the June traffic figures published today as well as bookings for July and August nevertheless reflect the over-capacity on certain long-haul routes, notably North America and Asia, with the attendant impact on yields," the airline said in a statement.

Cargo traffic meanwhile fell by 4.3 per cent in June, as the airline highlighted "persistently weak demand".

The airline said Venezuela's failure to release payments added to its decision to cut its profit target.

Venezuela's strict exchange rate controls require airlines to sell tickets in bolivars which the government promises to reimburse in dollars at a pre-determined rate.

But Caracas's failure to repay airlines in time has forced many to cut back or suspend their services.

Air France-KLM said Venezuelan routes were extremely lucrative before the debt issue.

Some "$290 million in revenues are held there" pending a deal with the government, the airline said.

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Air France unveils luxury first-class seat

Air France unveiled its new first-class section in Shanghai on Wednesday, fuelling an international luxury-seating race to win over Asia's rising number of high fliers.

The airline's "haute couture" suite will feature a seat that reclines into a bed stretching 2.01 metres long and 77 centimetres across (6 ft 7 ins and 30 inches) -- one of the most spacious in the world.

A total of 76 of the seats will be fitted into the airline's 19 Boeing 777-300 jets at a cost of 50 million euros (US$70 million), the company said as it showed off the new offering in an expenses-paid trip for journalists to China's commercial hub.

"In 2012, we made a promise to identify which products (we needed to improve) to push Air France up into the ranks of the major airlines," said the company's CEO, Frederic Gagey. "Those 50 million euros were needed to propel Air France to the top of those companies."

"It's our clients who will judge the product. We are extremely proud of the result and extremely confident. The improvement in the range affects all of our classes and not only first," he said.

Air travel in Asia is set to take off as growing middle classes take to the skies, prompting increasing competition for well-heeled passengers, and industry expert Didier Brechemier, of the Roland Berger Strategy consultancy, said that "first class is a tool in terms of image".

The launch came days after the Emirati airline Etihad revealed a first-class sofa that converts into a bed extending 2.04 metres long and 66 centimetres wide, which will go into Airbus A380 and Boeing 787 planes.

Singapore Airlines currently boasts the most spacious first-class seat, which it revealed in July last year at 2.08 metres by 90 centimetres.

First class occupies just a sliver of the air-travel market, with Air France's 52,000 such customers a year representing an occupancy rate of 38 percent, 0.3 percent of total long-haul passengers and 1.8 percent of long-haul revenue, said Bruno Matheu, head of Air France's passenger business.

But with return ticket prices averaging 9,000 euros (US$12,500) across the company's network the luxury seats are highly profitable and he said they "generate more revenue than if we filled that space with economy or business-class seats".

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French union calls off potentially-damaging pilots' strike

A potentially-damaging French pilots' strike has been called off at the last minute, the union organising the work stoppage said Friday, just days after Air France warned it risked hampering the airline's painstaking recovery.

The strike from May 3 to 30, which was called by the country's main SNPL pilots' union, would have seen pilots stop work at specific times every day, which Air France said would severely disrupt its medium- and long-haul flights.

On Friday, SNPL head Yves Deshayes said the union had decided to call off the strike "on the basis of (government) proposals" after representatives met with Transport Minister Frederic Cuvillier -- a move welcomed by Air France chief Frederic Gagey.

The pilots had planned to protest against a law stipulating that those who strike must declare their intention to do so 48 hours before the start of a work stoppage.

The regulation was put in place to give airlines more time to warn passengers about flight disruptions, but the SNPL says it actually allows them to hire temporary replacement pilots from other European countries.

"The government recognised for the first time that these practices were not acceptable," Deshayes told reporters Friday, adding the government had made "a strong commitment" on looking to modify the law, although "no guarantees" had been given to the union.

Earlier this week, Air France chief Gagey had warned that the strike -- which had nothing to do with the airline itself -- was "taking place at a crucial time in Air France's recovery".

After six years of financial losses that led to radical cost-cutting measures including thousands of job cuts, the airline is aiming to generate a positive operating income this year -- a target it said could have been damaged by the strike.

On Friday, Gagey welcomed the cancellation of the strike, saying it was "excellent news for Air France clients and employees".

"Air France can now devote all its energy to pursuing its recovery."

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Swiss regulator fines airlines for freight rate cartel

Switzerland's competition authority said on Friday that it had fined 11 airlines for fixing the freight market a decade ago, with Air France-KLM hit with the highest penalty.

"Between 2000 and 2005 several airlines agreed on certain elements of the price for air freight transport," it said in a statement.

"The investigation of the Competition Commission revealed that the airlines had agreed on freight rates, fuel surcharges, war risk surcharges, customs clearance surcharges for the US and the commissioning of surcharges," it added.

Such behaviour constituted a "serious infringement" of anti-cartel laws, it underlined.

The 11 carriers were fined a total of 11 million Swiss francs (9.16 million euros, US$12 million).

The penalty for Franco-Dutch company Air France-KLM was 3.9 million Swiss francs, which the competition authority noted was a "substantial reduction" on the potential sanction, after the carrier submitted a leniency application.

American Airlines was ordered to pay 2.2 million francs, and United Airlines, 2.1 million.

Also sanctioned were British Airways, Korean Air Lines, US company Atlas Air, Nordic carrier SAS, Japan Airlines, Singapore Airlines, Hong Kong's Cathay Pacific Airways, and Luxembourg-based Cargolux.

Like Air France-KLM, British Airways, Cathay Pacific, Japan Airlines, and Cargolux also received reduced sanctions after asking for leniency.

The competition authority said that the case was opened after Germany's Lufthansa opted to reveal the market fixing, in which it was itself involved.

As a result of having turned itself in, Lufthansa was granted immunity from any sanctions, along with its subsidiary Swiss International Air Lines which also took part in market collusion.

The competition authority said that the US Department of Justice and authorities in the European Union -- of which Switzerland is not a member -- had also investigated and fined various airlines involved in the case.

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Air France sets out conditions for Alitalia investment

Air France-KLM has laid out strict conditions for further investment in Italy's troubled Alitalia airline, including the cutting of 5,000 jobs, Italy's top business daily reported on Sunday.

The conditions, including the ousting of Alitalia's board of directors and a vast debt restructuring plan, were presented to Italy's transport minister Maurizio Lupi some 10 days ago, Il Sole 24 Ore said, without citing sources.

The job losses are far greater than those tabled by the Italian airline in its current restructuring plan, the report said.

Alitalia has been trying to persuade shareholders to inject funds as part of a 300 million euros ($407 million) recapitalisation programme.

Shareholders including Air France-KLM, which currently holds a 25 percent stake in Alitalia, have until the middle of November to decide whether or not to participate in the capital increase.

Air France-KLM chief executive Alexandre de Juniac said Thursday that since talks on recapitalisation began, the French group had been clear about requiring "strict financial, industrial and social conditions" and a "profound restructuring" for Alitalia.

The capital increase plan was put together in a hurry under pressure from the government, as energy major ENI threatened to ground the fleet by stopping fuel supplies because of unpaid debts.

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Air France flight makes emergency landing in India

A Paris-bound Air France flight from Mumbai was forced to make an emergency landing in the Indian city on Monday after developing an engine problem, the airline and airport said.

Shortly after take-off, air traffic control declared an emergency aboard the aircraft which was carrying 213 people, said Vaibhav Tiwari, a spokesman at Mumbai's international airport.

"The pilot noticed some technical glitch in the engine," Tiwari told AFP, adding that the plane turned around and landed safely at the Mumbai airport about half an hour after taking off early on Monday.

He said the passengers of flight AF 217 were put up in a hotel and would take the next scheduled flight by Air France.

An Air France spokesman confirmed that the Airbus A330 had returned to the airport.

"The plane turned around after a problem with a malfunctioning engine," the spokesman told AFP.

The airline spokesman did not disclose the nature of the engine problem but said it was "not a particularly unusual incident".

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A little hiccup with one of its two engines and an emergency landing has to be carried out. What I would like to assure passengers is that planes are built to be flown in a half broken stage. There is still one engine available to provide adequate thrust to maintain flight. So don't be too worried if it happens to you the next time. Stay calm, listen to the safety instructions, and you'll be on the ground in no time.

Air France launches offer to fight low-cost carriers

French airline Air France on Monday launched an offensive to compete with low-cost carriers, offering flights from four French hubs to 58 destinations in Europe and around the Mediterranean at fares starting from 49 euros ($64) for passengers who travel with carry-on baggage.

"Air France aims to adapt to the changes in purchasing behaviour and the new expectations of travellers, while at the same time attracting new customers," it explained in a statement.

It said that the programme was aimed at the 60 percent of clients for whom the lowest price was the most important factor.

The new offer is part of a restructuring plan presented a year ago which is designed to save Air France two billion euros by 2015, chairman Alexandre de Juniac told a press conference.

Low-cost tickets went on sale on Monday for flights beginning on February 6, and were expressly "aimed at clients who might be tempted by low-cost airlines," de Juniac said.

Although the group posted stronger-than-expected quarterly results in late October, it is under severe financial and cost-cutting pressures and is trying to fight against competition from budget European carriers such as EasyJet and Ryanair.

The new fares, which apply to flights from Orly airport south of Paris and growing Air France regional low-cost hubs in Marseille, Nice and Toulouse in southern France, "are a long-term offer" according to the airline's deputy director at Orly, Florence Parly.

Air France has found through a study that on short and medium-haul flights, 40 percent of its passengers do not check in bags at present.

The so-called MiNi offer, which does not include frequent-flier credits, is not limited to a specific time period, but customers who buy tickets will have to pay a surcharge if they subsequently seek to check in luggage, and cannot request specific seats via the airline's website.

The fares also complement a strategy by Air France-KLM simultaneously to raise standards for passengers who pay more for business and "Premium Economy" seats.

Commercial director Christian Boireau said that the airline expected to sell more than one million tickets at prices which would vary from 49 to 69 euros, and noted on Monday that the company's website was quickly saturated.

De Juniac said: "Our forecasts show that we will make money. The business plan is viable."

The plan was integrated in the carrier's Transform restructuring strategy so "it will not by itself require additional cost-cutting measures," he said.

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Premium airlines are one by one jumping into the low-cost business model. For this case, Air France found out that on short and medium-haul flights, 40 percent of its passengers do not check in bags at present.

This is a very good find and it enables the airline to reduce ticket costs for the passengers and yet not make a loss.