Air France-KLM has reiterated a need for group-wide operational simplification in order to achieve "sustainable profitability".

Air France-KLM has reiterated a need for group-wide operational simplification in order to achieve "sustainable profitability".

Chief executive Ben Smith states that efforts since late 2018 to simplify the group's fleet, clarify its main brands – Air France, KLM and Transavia – and reach new labour agreements aimed at "unlocking significant commercial and operational flexibility" were "fundamentals" of a restructuring plan.

"This is the starting point of a strategy that will allow Air France-KLM to reinvent itself," he says.

The group argues that its three airline brands, its hubs in Paris and Amsterdam, its "extensive and highly complementary combined network" and its "powerful" commercial partnerships are "unique assets".

"Air France-KLM Group has all the assets to regain its leadership position," Smith asserts.

However, the company believes that to "fully leverage" these assets, it must "simplify and optimise its mode of operation and reposition itself to pursue the most profitable traffic".

Cost-cutting initiatives identified by the group include "more flexible" aircraft utilisation, simpler internal processes at each airline, accelerated fleet renewal, and implementation of "additional group synergies".

More broadly, the group intends to lobby French authorities "to create a more competitive airline business environment", it says.

In order to grow passenger revenue, the group wants to simplify branding around its three "master brands", and to optimise the network around each airline's "unique expertise and core assets".

KLM is to become a "benchmark carrier for connecting traffic to and from Europe", while Air France is to "leverage its local market and premium strength" at Paris and across France, which the group describes as "the world's leading inbound destinations".

Transavia, meanwhile, is charged with becoming "the leading low-cost airline in France in terms of number of based aircraft", Air France-KLM indicates.

Financially, the airline is targeting an operating margin of 7-8% and "positive" adjusted free cash flow in the medium term, and hopes to create "prospects for returning to dividend distribution".

Regarding the possibility of adding further operations to the group, Air France-KLM says it will "pragmatically consider consolidation opportunities when and where they make sense".

Any acquisitions would be made "with a view to complementing and strengthening the Air France and KLM networks". But the group stresses that it remains committed to "strict financial discipline".