While the U.S. DOT forces carriers to keep flying domestic routes, France tells Air France to cut domestic flights by as much as 50% by 2024. Cuckoo...cuckoo...Air France will have to cut its carbon emissions and domestic flights as conditions for government financial support, France’s finance minister said on Wednesday.
For flights specifically in mainland France, emissions would have to be halved by 2024, which Le Maire said meant that domestic flights would be “drastically reduced” to focus on serving hubs for transfers.
https://www.reuters.com/article/us-heal ... SKBN22B2EL
So governments are in the wrong for making airlines cut flights, and also in the wrong for making airlines keep making flights, as a condition of getting bailed out (as per one of your other threads, concerning B6.) Are governments expected to give them the money with no strings attached? Because I'd point out that's a standard that we've never held private investors to. Or is your position that the airlines should be allowed to fail? I mean, sure, but that implies another set of questions. Do we want to wipe the board totally clean with every economic shock? I can see that having a certain ideological appeal, but ideologies don't put food on the table. Or do we need to compel businesses to keep a rainy-day fund somehow? It clearly isn't a competitive advantage under ordinary circumstances to have one, given how airlines behaved prior to this whole mess kicking off.
I think it's good that governments have some demands if airlines or any other business need taxpayer money. But, politicians shouldn't use the support for airlines for their own political gains. If there is market demand for flights within France, why force AF to cut them? If there is a market other airlines will jump at the occasion and take the revenue AF would've made, how does this help the French economy or the environment? The lost revenue could've been paid in dividend to the French government.
And it doesn't stop there, the French government told AF to buy Airbus planes. I would be very worried as an investor that a government official decides which plane AF should fly. And although the investments in sustainable air travel is good for the environment, there should be a businesscase behind it to make it truly sustainable.
Government interference in both Air France and KLM can be bad for their long time growth, profitability and their competitive position in the market. And this undermines the whole idea behind the financial support in the first place. I think the concern of governments should be to get the money back for the taxpayer and maybe make some money in the proces, while making AF/KL into a successful company that safeguards French and Dutch interests in the long term.
Just a couple of observations.....
1. AF is going to have to repay all the loans and money it gets from the state. There are strings attached - it's not a blank cheque.
2. AF already had on order a whole bunch of A220 and A350's long before state aid was being discussed. These planes are 20-25% more fuel efficient than a318/9 and 773's. So reduce a few more French Provincial cities with a few more A220's and yes we can make a huge reduction in emissions by 2024. Int'lly we are not ever going to fly the A380 again and the A340's are gone. We have 70 777's of various types many are not flying at the moment and the A350's and perhaps a few 789's could replace half the 777's when order filled.
3. The main reason for the state aid is to support employees and avoid BK. I am getting 85% of my my normal pay. First the company will offer retirement packages, do training and transfer people to stations where they are needed. Wow, isn't that nice a company that at least makes an effort to keep staff employed. Sure we'll have to work harder, sure the future is uncertain, but hell I'd rather be at AF than BA, VS, Norwegian, EZY, Ryanair.
4. Transavia can operate out of ORY.
5. The domestic stations losing CDG service is 1.5 - 2 hours on clean fast trains. Probably nicer experience.
6. AF is committed to lessening it's carbon footprint. OK maybe the virus is giving more govt impetus but what's wrong with that?
7. France is France they do it their way - what's wrong with that? Especially when they at least try to protect their employees because I am not sure how long it's going to take to get air travel back.
8. HOP needs restructuring regardless of green endeavors. It is a money loser in the group I can't say how much but changes were coming even before the virus.
9. AF if a huge Boeing customer, just as it is for Airbus. The AF Airbus aircraft chosen were on merit, the politicians just say they pressure AF to buy Airbus but that is just to make themselves look good. AF has done well taking a pass on the Max. Transavia France is all 737-7/8's. Based in LYS and BOD potentially. KLM is mostly Boeing now.
10. For the moment all AF pilot unions have longterm contracts signed. When was the last time that happened?
11. AF was really hitting all cylinders before COVID with strong profits in last quarter of 2019. and for the year I think AFKL made 1.2 billion euros. Hard to imagine socialists can make money, pay workers fairly, invest in reducing carbon foot print, and have a good product.
12. AF/KLM did not pay off their smaller profits to shareholders and management anywhere to the degree that the US3 did. You can't compare executive compensation and share buy backs of AFKL to there American counterparts.
Just scratching the surface here....