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Analysis of the strategy of Air France - KLM (2009)

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  1. The segmentation of the offer
    1. Airlines
    2. Bus
    3. Other modes of transport
  2. The segmentation of demand adopted by Eurostar
    1. Leisure segment
    2. Businessmen as consumers
    3. Brand identity prism of Kapferer

Pierre Henri Gourgeon, the current CEO of Air France, explains the success of the functional group on three main axes: a balanced and diversified operation, in Hub, an international alliance. These axes are the basis of the strategy of Air France KLM.

In a sluggish economy, Air France- KLM attempts to play on a balanced network. Between 2004 and 2007, while most other major global companies recorded sharp declines in profitability, network connections of AF-KLM flights to Africa and the Caribbean have enabled them to balance their profits (through diversification of their destinations), and enabling them to reduce the geopolitical risks (better allocation of risks).

Following the merger with KLM in 2004, the networks of both companies have been harmonized to offer 255 destinations today. In addition, to avoid the risk of cannibalization going against the desired synergies from the merger, it was decided to remove some lines and specialize with the two other main hubs, Roissy (Paris) for Air France and Schiphol (Amsterdam) for KLM. These account for 54% of daily flights in Europe.

The aviation market is divided into several alliances, these alliances are groups of airlines. There are three main ones which are Star Alliance, Sky Team and One World.

Sky Team alliance which AirFrance-KLM owns, represents 21% of the world share and includes nine companies. Created in 2000 at the impetus of Air France, the alliance knows a good development.

The purpose of the alliance is to offer the customer a set of destinations continuously with a maximum of opportunity. Thus, the alliance provides a better exposure and a higher rate of seat occupancy.

The alliance is of major interest to small businesses competing with each other. The alliance members agree to provide, through a platform of common control the flights of other alliance partners. It is therefore essential that the companies are not direct competitors.

The development marks the successful Sky Team Air France, which is responsible for the formation of this alliance. The group gained an international reputation in the airline industry.

The strategy of specialization may be adopted either by a cost leadership or a differentiation. Given the importance of group size it is clear that operating costs are better distributed.

The search for the critical size allows the group to benefit from synergies and compared to many competitiors to more limited resources. It is clear that Air France can do a better distribution of expenditures.

Tags: Air France- KLM, Sky Team alliance, strategy

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