Air France-KLM Group CEO Ben Smith was “pleasantly shocked” by news that the Biden administration will permit vaccinated Europeans to enter the U.S. this fall.
“It was a little bit off the timetable,” Smith said of the news at the Skift Global Forum earlier this week in New York. Before the pandemic, flights to North America accounted for 40 percent of the company’s longhaul revenues, but that number is dramatically lower now, given that traffic is essentially one-way. The group operated 64 daily flights to North America in 2019, and at the nadir of the crisis, was down to just four daily flights — all mainly cargo. “We are still far away from our peak.”
If current plans hold, the U.S. will reopen to vaccinated travelers in November. Although pleased by the plans, Smith had hoped the reopening had come a bit earlier, to take advantage of peak summer demand. “We were hoping this type of announcement would come out earlier in the summer,” Smith said. “But we were worried that it would go into next year and perhaps the [U.S. Congressional] midterm elections would have had an impact.”
Smith is confident that when restrictions ease, travel will boom. He pointed to the example of Greece, which eased its requirements earlier this year and which resulted in a “huge surge in bookings.” It’s too early to tell if the U.S. news has caused a similar surge, although joint venture partner Virgin Atlantic said bookings to the U.S. jumped 600 percent in the day after the Biden administration’s announcement. And KLM said Friday that it would resume flights to Las Vegas and Miami in December citing the easing of restrictions.
Because the booking curve remains short — a matter of a few weeks in advance of travel, rather than months — Smith had no clarity on whether holiday travel will be strong. He is, however, bullish on transatlantic demand next summer.
The recovery has been uneven across the group’s network. Europe is strong now that vaccines are more widespread — a marked difference from earlier in the pandemic when European travel all but collapsed. Australia could reopen before the end of the year, Smith said. And Africa has been “resilient,” fueled by strong visiting friends and relatives demand. When Air France-KLM’s expansive Asia network will return remains a question mark, however. “Asia is the most difficult,” he said.
Shortly before the pandemic struck, Smith launched a group-wide reorganization plan to rationalize Air France-KLM’s fleet and corporate structure. The process took a back seat to mere survival early in the crisis, but the work continues, Smith said. Part of the group’s future plans center on leveraging the carriers’ brands. “KLM is 101 years old,” Smith said. “We want to make sure the KLM brand remains relevant in all markets.” And for Air France, the group is working on “how to ensure this unique French product can be leveraged.”
KLM’s model of flowing passengers from around the world through its hub in Schiphol “works very well,” Smith added. “We want to optimize that.”
Meanwhile, Air France has “a lot of complexity,” Smtih said. “The financials before 2019 were not great, and fleet was a big part of the reason.” The carrier has simplified its fleet, retiring all four-engine aircraft, like the Airbus A340 and A380. KLM’s fleet rationalization was simpler, centering mainly on retiring Boeing 747s. That carrier’s longhaul fleet will consist only of 777s and 787s. “We are moving as we can while being financially responsible.”
Air France-KLM has almost 100 aircraft on order. It will deploy 60 Airbus A220s — the first due by the end of September — over the next four years on its domestic France and intra-Europe networks. The carrier has received about one-third of the 30 A350s it has on order, Smith said.