Business and management

Standard level

Internal assessment

How did Air France strategies

affect their market share?
Candidate number: Gyw 581
Word count:

1
Table of contents:
Content Page #

Cover page 1

Table of contents 2

Introduction 3

SWOT analysis 4

Product positioning map 5

Product life cycle 6

Analysis 7

Conclusion 8

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 1- Introduction:
Air France is the French flag carrier, headquartered in Tremblay-en-France. It is owned by
the Air France-KLM group and a member of the Sky Team global airlines alliance. It was found
in 1933 and it is available in 201 destinations1. The airline’s global hub is at Charles de Gaulle
Airport with Only Airport as the primary domestic hub. Air France operates a mixed fleet of
Airbus and Boeing wide body jets on long-haul routes and uses Airbus A320 family aircraft on
short-haul routes. At the time of its merger with KLM, Air France had the most operating
revenue of any airline in the world and was the largest airline in Europe. Air France entered a
massive codeshare with KLM in 2004 forming the Air France-KLM group.2

The airline market is saturated with fierce competition. It is very hard to gain a market share in
this market. Since there is a high competition due to the high number of airline companies. Thus,
travelers are not attracted easily. Usually they take several factors into consideration before
choosing the right airlines. Factors taken into consideration are; safety, comfort, destinations and
value for money. If the airline company is famous for low quality airplanes or crashes, then it is
less likely to be chosen. Sometimes the seats are not comfortable enough for long trips which
might cause injuries for the passengers. Some airlines are restricted to some destinations and
they are not allowed to reach other destinations. This also might make people not choose a
certain airline. The value for money is so important for a traveler who is restricted to a certain
amount of money so expensive flight seats might not be chosen by the traveler. My research
question is; How did Air France strategies affect their market share?

1
https://www.ukessays.com/essays/management/business-report-for-air-france-klm-management-essay.php
2
https://www.britannica.com/topic/Air-France

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2-Investigation and findings:

2.1- SWOT analysis; “It is meant to be the first stage in the planning process. It helps to
brainstorm the perceived strengths, weakness, opportunities, and threats facing the business.”3 –

Strengths
1- Air France-KLM has a balanced global
network
2- CDG and AMS (their hubs) are
considered to be of the top five airports
3- Being a member of the Sky Team
alliance helps with the pricing
Opportunities
1- Air France-KLM fleet renewal will
benefit the customer perception
2- Their relationship with Etihad could be
extended
3- Deeper integration of Air France- KLM
would offer advantages
Weaknesses
1- Air France’s balance sheet constraints
have limited its capital investments
2- It suffers from brand confusion
3- Pilots have so much power over Air
France-KLM
Threats
1- Short-haul pricing pressure as
competition escalates
2- High fuel cost can reduce margin profit
of Air France
3- High employment rate

Air France-KLM is known worldwide, and they have airfares to so many destinations around
the world. Their domestic hubs are considered to be the largest hubs in the world. Strategic
alliance with well-established airlines lowers their price and makes them serve better.

Since Air-France has a low market share, they lost so many customers thus, their average
profit decreased. People usually are confused between Air France and Transavia in France even
though Air France-KLM are solid brands. A small strike by the pilots in Air France-KLM would
lower their profit drastically. Even though the management tried to stop the strikes and all this,
but the pilots were stronger.

Air France has an old fleet and most of their airplanes are old. So, buying new airplanes will
get them more people. It has a codeshare agreement with Etihad airlines that could be extended
which opens for them the Gulf market. Even though they have been integrating for eleven years,
they did not show full merger. Regardless of the merger, each brand still has a separate entity,
operations, fleet and labor structure.

As one of the main aspects that airline companies compete on are the destinations. Thus, short-
term pricing gets harder as competition increases. The prices of fuel are increasing thus the cost
of Air France is increasing. This lowers the margin of profit. Air France have employed more
employee that it needs which increases the cost. It is either that Air-France have employed more
staff than needed or the staff are not doing their job efficiently.

3
IB Oxford Business book ISBN 978-0-19-839281, David Homer and Michael Bowen-Jones.

4
2.2-Product positioning map; “A visual representation of how consumers perceive a product in
relation to other competing products.”.4

High price

Poor quality

High quality

Low price

Air France is positioned in the area of High price but low quality because Air France charges
high prices but provides low quality services. On the contrary, Fly Emirates, Lufthansa and Qatar
airways are placed in the area where high quality and high price meet. They charge high prices,
but they provide a high-quality service. The only airline company that competes with Air France
is Ryanair because they are on the same line, but the difference is that Ryanair charges very low
prices to make traveling affordable for their target market.

4
– IB Oxford Business book ISBN 978-0-19-839281, David Homer and Michael Bowen-Jones.

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2.3Product life cycle:
A product life cycle shows the course that a product takes from its development to its decline in
the market. Most products go through six stages in their life cycle: development, introduction,
growth, maturity, saturation and decline. –5

Air France have reached the Maturity stage of the product life cycle. They have to extend their
product’s life in the market. Merger destinations new planes. The first strategy Air France used is
the merger with KLM. This merger has opened for Air-France more opportunities in the airlines
market. This have expanded Air-France’s shares in the market. This is the first step Air France
adapted as an extension strategy. As a second extension strategy, Air France have opened new
destinations for the travelers. Destinations are what usually airline companies compete on. So,
they have opened new markets and expanded their market share and raised their competition
with esteemed airline companies. Air France is famous for old fleet. So, buying new fleet will
show a good image that enhances their reputation and increases their market share as well.

5
IB Oxford Business book ISBN 978-0-19-839281, David Homer and Michael Bowen-Jones.

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3-Analysis

Air France has a balanced global network, in charge of two of the top five airports in Europe,
(their hubs) and is a member of the sky team alliance. Air France also has the opportunities of
fleet renewal, extended relationship with Etihad airlines and more integration with KLM. They
also have a limited capital investment. Also, people are still confused between the Air-France
and KLM branding. The high competition in the airways market is threatening =

As we can see, Air France is classified on the product positioning map in the region of low
quality with high price. This has lowered their market share since it affects the consumers’
perception of their services and Air France’s reputation.

4-Conclusion:

Air France has still to work on their limited capital investments. It should also stop the
consumer’s confusion between Air France and KLM. Air France should limit the pilots’ power
and strengthen the managers. Also. Air France should protect itself from the threats. There is a
high competition in the Airways market, so they should be careful of the pricing. They should
also maintain the price at a certain level regardless of the high fuel cost. It has a high
employment rate. Air France has more employees that it needs, and this might be a major threat.