Five years after his appointment as head of Air France-KLM, Ben Smith’s assessment is extremely positive, especially given the events he has had to deal with. But that shouldn’t blind us to the fact that there is still room for improvement, and that the game is far from won.
Ben Smith’s appointment as head of Air France-KLM on August 16, 2018 came as a big surprise. A foreigner, not a high-ranking civil servant, but a real professional in the sector – we weren’t used to that. If the profile appealed (at least to us), the game was not won in advance: how was he going to get by with Air France, this very political business, riddled with senior civil servants who know nothing about the sector, where, as a former executive had told me, “too many people have the power to say no“, sclerotic by its corporatism. Was he finally going to tame the Dutch KLM rebels, who by the way were not only complaining for wrong reasons? Was he going to ensure that, after 14 years of a marriage never really consummated, Air France and KLM would finally become Air France-KLM?
All this at a time when the Group is not doing well financially, especially Air France, which was bled dry, and when this same Air France had been in the midst of an ongoing union dispute for several years. It took courage, even recklessness, to take on this job, especially at such a salary compared to market standards. Or a lot of self-confidence.
Background to Ben Smith’s arrival
You can’t talk about Ben Smith’s arrival without talking about the context in which he arrived. But to say that Air France was a bottomless pit, an irreformable business with unions that gave the impression of preferring the death of the airline to the loss of their benefits, that Air France and KLM didn’t get along and that the economic situation was critical would be incomplete.
There’s a photo at one point, but there’s the dynamic that led to this situation. Starting out with a handicap is complicated, but when you’ve been in a negative dynamic for fifteen years or so, the picture is even darker. Before climbing, you must first stop the descent.
And many have taken part in, or even accentuated, the descent.
Then there was the short-lived Janaillac, who seemed to be wondering how he got there and plunged the business into crisis by resigning after a referendum that nobody had asked him to organize.
There was the likeable de Juniac. He knew the industry (as he later proved at IATA), but didn’t have the manner or the rhetoric. Nor, perhaps, the courage.
Spinetta ? He had the right intuition when he bought KLM. But he sacrificed the airline’s competitiveness for labor peace. And by granting KLM the right not to cash pool, he has sown the seeds of the evil from which the group will suffer in the future.
Attali ? He increased the airline’s losses so much that at one point we thought he was going to strike oil.
We won’t even mention the Gourgeon wreck, the unanswered questions about the deterioration in safety under his tenure, the degradation of the product ( the densification and toboggan seats contrary to the market), and the lack of firmness in dealing with pilots…
To run Air France or Air France KLM, you need to know the industry (or even have a real passion for it), have a real vision, be politically astute, a good negotiator, but also know how to stand firm.
All the above-mentioned names had several of these qualities, but none had all of them.
In short, we’re still waiting for a real captain on board since the departure of Christian Blanc in 1997.
Suffice it to say that Ben Smith was the man of last resort for the airline, because if some people think that Air France is indestructible, you don’t have to look far to find national airlines that have had to file for bankruptcy or be taken over because they couldn’t survive on their own.
A mandate under the COVID banner
If we are to judge Ben Smith’s tenure, we need to be aware of the situation he found when he arrived, and look at the pitfalls he faced.
Appointed in August 2018, he will see the EU’s borders close in March 2020, and then little by little travel within the Union come to a halt, until we find ourselves with an almost totally grounded fleet. With a return to normality in 2022, he was only able to operate under normal conditions for two and a half years. The rest of the time he faced the worst crisis the sector had ever seen, a crisis that no one could have imagined even in their worst nightmares.
Such a crisis could have been fatal for any healthy business, so think of a very fragile airline…
Well, in 2023, Air France-KLM is still standing on its own two feet, and while state aid (which has since been reimbursed) has had a hand in this, the company’s management is to thank for the dynamism with which the group has emerged from the crisis.
In October 2018 we identified the areas we felt were priorities for Air France-KLM’s new boss, areas we were then pleased to see were indeed part of his roadmap.
Let’s make an assessment 5 years later.
Restore customer trust
It may seem like a long time ago, but when Ben Smith arrived, customers were worried that their trips would be ruined by one of the many strikes the airline was famous for. So much so that some people preferred to turn away from it, just to avoid problems.
Worse still, the message sent out by the unions during certain strikes was sometimes pure contempt for customers.
All that seems a long way off. If he has begun to reform the airline, it has been done calmly, and a more peaceful company means renewed trust, both internally and with customers.
Putting the customer back at the center
The days when the airline thought its customers were captive also seem to be over. The airline is starting to really try to understand its customers and their needs.
Better late than never, Ben Smith has finally realized that, contrary to an idea long held by marketing people, a large proportion of its business class seats are occupied by leisure travelers, and that the bulk of business travelers travel in economy.
It would seem that some are even beginning to understand that business contracts are far from a guarantee for capturing the clientele of business travelers.
At the same time, the airline continues to listen to its customers, often by means of questionnaires sent out to targeted customers…even if we weren’t too keen on the questions asked on the ones we saw.
But not everything is perfect. When hot food disappears from medium-haul flights because the airline has installed only one oven on A220s, and this oven is used only to reheat…staff food, it makes some customers hysterical, and understandably so.
Not only do we not really believe that this removal corresponds to passenger demand, but smelling the crew’s dishes from the cabin is reminiscent of the old bad habit of playing staff off against customers.
Lining everyone up, even if it means kicking people out
Air France had the reputation of being a business where too many people had the power to say no. Since his arrival, Ben Smith has gradually surrounded himself with industry specialists from a variety of backgrounds, and it seems that decisions and their execution are now moving faster. At both Group and airline level, people are thinking more in terms of business and less in terms of politics, at every level.
And if all is still not perfect with KLM, the upheavals seem less frequent than before. Could this be due to the fact that Smith finally got rid of the turbulent Pieter Elbers, replaced by the more consensual Marjan Ritel?
However, the go to market seems to be much faster than before, and we’re feeling a dynamism that we haven’t seen in the past.
The big irreformable ship has become agile, and this is to the credit of the new management.
Clarify brands and their positioning
One of Ben Smith’s first decisions was to put an end to the proliferation of brands that were making the offer unreadable. Goodbye Joon, farewell Hop! we won’t miss you.
There are now two premium brands, Air France and KLM, and one low-cost brand, Transavia. It’s crystal clear.
On the other hand, we don’t like the fact that on certain routes, only the low-cost offer is available.
Modernizing the fleet
COVID killed the last A340s, A380s and B747s (excluding freight), while deliveries of B787s and A350s are steady. The A220 has also made a remarkable arrival at Air France.
By 2028, 68% of the fleet will consist of new-generation aircraft.
We may regret the hasty withdrawal of the A380 : while this was a sound decision, inevitable in the medium term, it might have been useful to keep them on standby for one or two years for the summer season, to take full advantage of the explosion in traffic, as Lufthansa did, while waiting to receive all the A350s. In fact, contrary to popular belief, few airlines have really abandoned the superjumbo…
We also appreciate the rationalization of the fleets, with the A350s at Air France and the B787s at KLM, although there is still room for improvement.
Resuming the move upmarket
So here we have several sub-topics.
The cabins
Air France is making real progress on long-haul cabins, with the recent A350 and B777 cabins as examples. The business cabins are really nice, the premium economy cabins are finally abandoning the fixed-shell seats, and the new economy cabins also look very pleasant. On the other hand, the Cirrus seats in the Best & Beyond cabins of the B777 and B787 are ageing really badly…
It’s also hard to understand the choice of a 2-2-2 configuration in the A330’s business class, when even the “COI” cabins are 1-2-1, even with a slightly less comfortable seat than the rest of the fleet.
As for medium-haul service….it is what it is, with decent but not exceptional cabins, apart from the recent A220.
Short-haul cabins ranges from average to really bad…
And we can’t wait for the new La Première class to arrive in 2024.
At KLM, on the other hand, things are less rosy on long-haul aircraft. Still 2-2-2 business class cabins on B777s and A330s, B787s with a Cirrus inspired by Air France’s but not as good, and the long-delayed announcement of new cabins. And again, this introduces a new model, just for the 777. A far cry from LH Group’s rationalization.
We’d also love to see one or other of the airlines do away with Eurobusiness cabins in medium-haul business class, and install a real, dedicated seat, as Turkish Airlines or Asian airlines do on their single-aisle aircraft. That would really set them apart and give them a real edge over the competition. But it will remain a dream…
Catering
Let’s start with long-haul.
This has always been the hallmark of Air France, a little less so of KLM, but each in its own style offers good catering, and we’ve never had any complaints.
But good isn’t exceptional: you can also eat very well or even better on some European, Asian or Gulf airlines. This is especially true at Air France, which logically uses it as a selling point: the food is good, but not good enough to encourage people to choose the airline over another. You can also eat very well, or even better, on Turkish Airlines, SAS, Austrian, Singapore Airlines, Qatar Airways and many others.
KLM doesn’t have the same pretensions, but in our opinion offers a very decent service that never disappoints.
Then medium-haul.
On the Air France side, things are much less brilliant. The fact that the service is ridiculous and almost non-existent on short flights is understandable, even if it doesn’t correspond to the high standards claimed by the airline, but it is now just as ridiculous on longer flights. The food provided in Economy is unworthy of a premium airline, and that provided in Business is correct but often insipid.
What’s more, regardless of the class of travel, hot dishes have completely disappeared. But not the ovens! If you smell an appetizing dish mid-flight, know that it’s intended for the crew.
It’s a good deal for the crew, for whom it means less work, and for the airline, which saves money, but the customer’s interest is still in question.
Just a reminder that Swiss, Iberia, Austrian and even TAP manage to serve hot meals on 2-hour flights! And Turkish Airlines for a 40-minute flight, even in economy, and even when 350 passengers have to be served on a 777 between Istanbul and Izmir!
In short, if you’re on a medium-haul flight of 3 hours or more on Air France, whatever your class of travel, stop off at a sandwich shop beforehand.
And what about KLM? Well, it’s no better.
The staff and the service
Often criticized, we feel that Air France’s service and the general attitude of its crews have really improved in recent years, and this is a comment we often hear from people around us.
As for KLM, we’ve always found the staff efficient and friendly, even if the promise isn’t the same as with Air France.
On the other hand, I’d like to add a note of caution: we have the impression that on Air France, enthusiasm and attention diminish in proportion to the length of the journey. The worst is short-haul, where, with one exception we’ll talk about shortly, crews seem detached, distant and work almost mechanically.
Perhaps out of spite and because they feel the airline doesn’t care about short/medium-haul? Maybe.
Bottom line
While not transcendent, there has been a real move upmarket at Air France, less so at KLM. At least on long-haul routes. In this respect, the group’s two airlines are asserting their positioning: long-haul airlines with a more premium, upmarket positioning for Air France.
The corollary is that short-medium haul seems to have been totally abandoned, with a service that has deteriorated considerably in recent years. Look no further than why we ended up migrating to Star Alliance and OneWorld for our intra-European flights.
Another consequence: the focus on front classes, particularly at Air France. It’s not for nothing that, while Air France is well ranked in the latest Skytrax rankings, it suffers in the economy cabin, ranked only 16th.
At this point, it would be better to consider a qualitative and quantitative Buy On Board rather than this unworthy offer (too bad there aren’t enough ovens on the new aircraft to offer hot food…) or even subcontract to easyJet…..
So there’s still a gap with the best in the market, even if Air France is doing very well in the premium segment and KLM reasonably well.
Getting rid of the state
We wrote this before the COVID, and you’ll tell me that Air France was quite happy to find the State to rescue itself during the COVID. That’s right.
But Lufthansa, which is 100% private, was also saved by the German state, which not only made a profit from the operation but also withdrew from the airline’s capital as soon as possible.
The truth is that the State is a cumbersome shareholder that we don’t consider indispensable, and that a business should be free to decide its strategy without interference.
Let’s not forget that Lufthansa came close to refusing state aid during the COVID process, if the quid pro quos demanded were too high, even if it meant filing for self-administered bankruptcy. “Lufthansa has had the best three years in its business history. If it is to succeed in the future, it must continue to be able to shape its destiny in an entrepreneurial way“said its CEO, Carsten Spohr.
In the meantime, the French government has got Air France to abandon some domestic routes. A lifeguard who holds out one hand and slaps you with the other.
Faced with such a request, you might think that Lufthansa’s reaction would have been “screw you, we’re filing for bankruptcy”. Perhaps that’s the language the group’s management would have liked to use, but didn’t have the means to do so.
In the particular case of Air France-KLM, the presence of two governments in the group’s capital is also a source of tension.
We therefore remain convinced that Air France-KLM should only be accountable to private shareholders in order to be properly managed. We don’t know what Ben Smith thinks, or if it’s a priority topic. But would he be able to afford it anyway?
Build an airline
To achieve greater efficiency, Air France and KLM can no longer remain two airlines working together under the umbrella of a single group, but must develop much greater synergies, as the Lufthansa Group is doing.
Fleet rationalization is a good step in this direction. Elbers’ departure from KLM also seems to have pacified relations between the two airlines.
But there are ways of going much further in terms of pooling support functions, fully harmonizing cabs, etc…
Merger is impossible, but deep integration is a necessity.
Participate in the consolidation of the sector
This was not in our original roadmap, but it’s a subject that Ben Smith himself raised with shareholders at the end of 2019. And this is a vital issue today.
When Air France and KLM merged in 2004, the group became the largest in Europe, world leader in terms of revenue and 3rd in terms of passengers carried.
20 years later, it has become a second-class player.
Of course, there was the emergence of the Gulf airlines and their rapid growth.
But there’s also the formation of IAG (British Airways, Iberia, Aer Lingus, Vueling, Level and tomorrow Air Europa) and the bulimia of the Lufthansa Group (Lufthansa, Swiss, Austrian, Brussels Airlines, Eurowings, and tomorrow ITA). And for tomorrow, the threat of Turkish Airlines is looming, and Ben Smith is well aware of it.
Air France-KLM, with its three brands (Air France, KLM, Transavia), looks pale in comparison, and its European footprint is small compared with its competitors. Critical size is a real issue, but not the only one.
Air France-KLM not only needs to expand its footprint and network, it also needs a new hub! Schiphol, once an asset, is now becoming a weakness, and the group needs a new growth driver if it is to regain its position as Europe’s leading group, which was Smith’s stated objective when he arrived. And the best way to get a new hub is to buy an airline that has one!
How did Ben Smith go about this?
Let’s just say that he did what he could given the opportunities that came.
There was ITA, of course, but because it had not repaid its COVID subsidies, the group was unable to compete on equal terms. The Italian government wanted an industrial partner, but Air France-KLM couldn’t offer a commercial partnership, so Lufthansa snatched up the bid at the last minute. There’s nothing to reproach here, even if it must have been hard to fail so close to the goal.
What are the remaining options? We’re thinking, of course, of the forthcoming privatization of TAP, and Ben Smith recently mentioned looking at SAS.
In the case of TAP, it will have to face both IAG and Lufthansa Group, and there’s nothing to say that Air France-KLM is the favorite.
As far as SAS is concerned, there’s nothing to suggest that the airline is for sale, and it’s a safe bet that if it is, Lufthansa won’t let anyone get their hands on territory that has historically been Germany’s economic and commercial preserve.
Maybe his chance is that at some point the EU considers that things have gone too far in terms of concentration, and puts a stop to his competitors’ attempts.
However, remember the prediction that there will only be 12 major airlines left in the world. While Air France should logically be one of them, we can’t say today that its place is assured.
Bottom line
5 years after his arrival, you’d need to be in bad faith to say that Ben Smith’s record isn’t positive. The group is still alive, and when you consider where he started from and what he had to go through, that’s already a good thing.
He reformed with a certain talent without alienating the social body of a business he pacified. He has resumed the move upmarket, notably at Air France, with cabins worthy of the name at last, even if the lack of coherence between the different aircraft is glaring. He rationalized what could be done to make the group more competitive. It has finally buried, at least partially, the hatchet with KLM.
Could he have done more or faster? Theoretically yes, but given the COVID episode, he only had a free hand for half his term, and to see Air France-KLM so dynamic and in such good shape today is already beyond expectation.
There are still two black spots for us.
First, a short-medium-haul product unworthy of airlines that claim a certain standing, notably in the case of Air France.
Then there is the takeover of other airlines. You can’t blame Ben Smith for what was done (or not done), given the state of the airline’s finances when he arrived and the context in which the sale of ITA took place. On the other hand, it will have to be decisive in future deals, otherwise Air France-KLM will be no more than a minor player in Europe.
In any case, we’re not going to claim that Ben Smith is already one of the best CEOs Air France-KLM has ever had, but we’re not far from that.
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