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Air France-KLM to invest 1 billion euros into low-cost brand

09/10/2014 | Reuters

Air France-KLM to invest 1 billion euros into low-cost brand
© Le Journal de l'Aviation
Franco-Dutch airline Air France-KLM plans to invest 1 billion euros ($1.3 billion) in growing its Transavia low-cost unit in Europe, the company said.

The plan will create up to 250 new pilot jobs by 2019 and grow Transavia's fleet to over 100 aircraft from around 50 at present, Chief Executive Officer Alexandre de Juniac told French daily newspaper Les Echos.

A spokesman for Air France-KLM confirmed the report.

Juniac said the move would allow the business "to figure among the biggest low-cost players in Europe" and did not rule out an acquisition to supplement growth. "If an opportunity presented itself we would look at it, but that's not the case at the moment," he told the newspaper.

Europe's second-largest traditional carrier by revenue said last week its board had approved a plan to open new bases under the Transavia brand in Europe in a bid to recapture market share from both low-cost carriers and fast-growing Middle East rivals.

By expanding its low-cost operations, Air France-KLM is following the example of German rival Lufthansa (LHAG.DE), which is expanding budget services via its little-known Eurowings carrier and considering a budget long-haul unit.

But Lufthansa and Air France, which have both issued profit warnings in recent months, are hampered by powerful unions in their efforts to lower costs.

Pilots at Lufthansa have planned more strike action on Wednesday in a row over retirement benefits, while Air France pilots are planning a week-long strike from Sept 15 to Sept 22.

Juniac is open to negotiation on benefits tied to seniority and incentives for Air France pilots who transfer to Transavia, but he will not yield to trade unions demanding that the labour contracts of Transavia pilots carry the same terms as those flying under the Air France brand, according to Les Echos.

Juniac said Transavia France would see its fleet more than double from 14 to 37 aircraft, but only if pilots agreed to preserve Transavia's specificities, the paper said.

(Reporting by Natalie Huet and Andrew Callus; Editing by Keiron Henderson, Cynthia Osterman and Stephen Coates)

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