Gilbert Sedbon/PARIS

AIR INTER HAS SWUNG back into profit for the first time in four years, but the carrier warns that it is preparing to defend itself against savage competition expected in the French domestic market.

Air Inter posted a net profit of Fr21 million ($4 million) for 1994, marking a turnaround from the Fr185 million loss forecast a year ago (Flight International, 8-14 February).

"Within the next two years, we must prove our worth, on the home front and abroad," warns chairman Michel Bernard, however. UK airlines, led by British Airways and its French partner TAT, have already won access to Air Inter's main hub at Paris Orly, with others such as Lufthansa, KLM and Lauda Air due to follow.

"As far as I am concerned, TAT has ceased to exist and we now have to deal with the might of British Airways," says Bernard. He adds that BA has launched a strong attack on the business-travel market. Air Inter is also fighting to hold its own against competition from private French carriers such as AOM, Air Libert‚ and Euralair, says Bernard.

Within the next three years, Air Inter expects to lose one-third of its domestic traffic, but hopes to compensate through new routes to Spain, Portugal and North Africa, as well as through lower costs. Bernard has called for a wage freeze and a 10% productivity improvement from the carrier's 11,000-strong workforce.

Bernard says that the average Air Inter fare is now about Fr600. "To beat that, our competitors must go down to Fr400 and we doubt if they will succeed. In due course, some carriers will have to fall out," he says.

At the same time, Air Inter is fighting a tough internal battle within the Air France group to position itself to take the lead in a new European operation, which is due to swallow up the group's domestic and regional services.

The plan was revealed in 1994 as part of the group's three-year restructuring programme, but will not be launched until 1997, when the French carrier has received the last of its Fr20 billion in state aid.

The European Commission imposed constraints on Air France in return for allowing state aid, but these have not been applied to Air Inter. Although Air Inter is 72% owned by the French flag carrier, Air France argues that it will continue to be operated as an independent carrier.

"We are now fighting with our own resources and mapping out our own strategy," says Bernard.

Source: Flight International