By Daniel Boffey – theguardian.com
As the head of Europe’s largest intercontinental airline, Jean-Marc Janaillac can speak with authority on the complexities of cross-border travel. He carries some political insight, too, because he is chief executive of a business, Air France-KLM, that is 17%-owned by the French government.
At the intersection of pan-European travel and politics lies Brexit, of which Janaillac is a dispassionate observer. After all, it is not his business that will be most affected by a split between London and Brussels. Janaillac says Britain leaving the EU is neither “an opportunity nor a catastrophe” for a business created by the merger of the French and Dutch national airlines in 2004.
“For Air France-KLM, and other airlines, the British market is important but it is not a huge part of our activity. I think it is more a problem for British airlines than continental operators,” he said.
The 64-year-old gives a tour d’horizon of the issues facing British rivals come the leaving date of March 2019. They range from the threat of not being able to fly beyond British borders to having to having to accept the jurisdiction of the European Court of Justice – the latter being a red line in the Brexit negotiations for Theresa May.
But first, the basics: will the likes of British Airways and easyJet be able to fly to Europe once the UK has exited the EU? Janaillac, who took over Air France-KLM last July, says that the British government should be planning for the worst-case scenario, in which a new agreement between the UK and the EU does not materialise. This would mean flights between Britain and the continent could be grounded because the UK will no longer be a member of the European Common Aviation Area.
Under the ECAA regime, any airline owned and controlled by EU citizens is free to operate anywhere within the EU without restrictions on capacity, frequency or pricing. A new agreement will have to be struck if British airlines are to continue to enjoy the freedoms of today.
“Some say if there is not an agreement all the flights are going to stop and British people with homes in Spain will not be able to fly home for the weekend,” he said. “Others say that former agreements are going to work. I think the government should prepare. I mean, plan in order to assure that things are going to be smooth in March 2019, if there is no agreement. I hope it is possible to have an intermediary period.”
Then comes the Brexiters’ pet hate – the European court of justice. Janaillac says that bowing to the ECJ will be unavoidable for a UK-based carrier if it wants to operate services within the EU – between Berlin and Rome, for instance. Indeed, easyJet has already announced plans to set up a new European headquarters in Austria for its intra-EU flights and that unit will therefore operate under the auspices of the ECJ.
For other British airlines, Janaillac says that it would be unacceptable if UK airlines were able to operate with a lower level of rights, or forced its passengers to seek justice in British courts.
“We would approve the British airlines flying within Europe as European operators on one condition: if they have the same rights, they should have the same obligations as European carriers,” Janaillac said in an interview in Brussels, where he was attending a gathering of European airline executives. Citing the example of Norway’s low-cost carrier, he added: “A bit like Norwegian [airlines]. I think it is very clear: 100% of the rights means 100% of the obligations. If not, we will not have a level playing field.”
Janaillac comments reveal how problematic Theresa May’s insistence that Britain will no longer accept the jurisdiction of the ECJ will become later in the Brexit negotiations. The prime minister has claimed that whether or not the UK has left, the remit of European judges should be regarded as a test of whether Brexit has been delivered.
The French state, which is already pushing the importance of the role of the ECJ in the protection of citizens’ rights in the Brexit negotiations, is likely to be pushing the airline’s interests, where it can. The French president Emmanuel Macron has made it no secret that he hopes that French businesses will exploit the opportunities caused by the UK’s decision to leave the bloc.
Although Ryanair is a bigger player by passenger numbers, Air France-KLM is a powerful presence in the European airline business. It has a fleet of 346 planes which carried 93 million passengers to 328 destinations worldwide in 2016, allowing it to claim to be Europe’s biggest carrier for intercontinental flights.
Speaking of easyJet’s Austria move, Janaillac says: “I guess the authorities will check. I think the rule is either you control the airline or you don’t. Is it a subsidiary that the company doesn’t control? For me, it is a bit strange.”
There is a competitive edge to his easyJet comments. Air France-KLM launched a new subsidiary, Joon, last month, as part of the French flag carrier’s attempts to cut costs and compete with low-cost models and the recent expansion of Gulf-based airlines.
Janaillac said his new airline would only ever account for 10% of Air France-KLM’s fleet but that it felt it had been “compulsory” for the company to diversify. Cabin staff will work under separate and less generous contracts to those enjoyed on Air France-KLM, and the airline will offer one-way tickets to passengers. “The idea was to have a new airline with a less expensive cost structure,” he said.
“We are going to fly between Barcelona, Lisbon and Berlin and we are going to compete with many airlines, but especially with easyJet. We do say that if you change the naming, the positioning, you [attract] people who would not have looked at our site.
“They can change their minds [about Air France-KLM] and check our prices and see that they are not that different to those of our competitors.”
Air France-KLM’s profits just topped €1bn (£890m) last year, when fuel prices were low but, until 2015, the group, the result of a merger in 2004, had failed to make a profit. Although it already has one low-cost subsidiary, Transavia, Air France-KLM has failed to force through lower wages and conditions on other airline staff comparable to those at competitor airlines. Analysts say the operator’s subsidiaries will struggle to match easyJet’s average costs.
Andrew Lobbenberg, aviation analyst at HSBC, said Joon remained “a tool to drive cost reduction at the legacy business”. He said: “They are going to use it as a bit of a laboratory on the marketing and design side, to make it more attractive to millennials. But they battled hard for significant change in the labour contracts at Air France and it didn’t work.”
The funky new carrier, with cheaper crew and some concessions from pilots, is a subtler attempt than the aggressive change seen at British Airways owner IAG, he suggested: “But it’s a better productivity and cost proposition for Air France.”
Janaillac said it was not a matter of seeking to undercut easyJet, and he offered a scathing response to Ryanair’s problems this summer, when hundreds of thousands of customers had their flights cancelled due to a pilot rostering error.Ryanair’s pilots have been reluctant to come to the company’s aid, amid tensions over pay and conditions.
Janaillac has little sympathy for his under-pressure counterpart, Michael O’Leary. “I have never [known] sympathy from Ryanair towards legacy carriers and towards Air France-KLM in particular,” he said. “I don’t feel any sympathy. It is proof that its model, its social model especially, which for us is totally contrary to the European norms and the social content of our culture, has some limits.”
Dublin-based Ryanair, however, will remain within the EU after 2019. It is the UK carriers that need to change their model.