Air France-KLM chief warns of western airlines joining China’s post-Covid travel boom

European airlines, forced to take longer routes to Asia to avoid Russia, will struggle to compete with Chinese rivals as travel recovers from Covid-19 lockdowns, the Air France-KLM chief executive has warned .

Ben Smith said Chinese airlines have an “unfair advantage” over European airlines, which have been banned from Russian airspace since Ukraine’s all-out invasion almost a year ago, with restrictions imposed by both the EU and Moscow. Chinese airlines are still allowed to fly over Russia and take shorter routes to Europe.

“Flying time between Paris and Seoul can be up to three hours,” Smith said. “If you have a Chinese airline flying through Russia, they have an unfair advantage over us.”

Airlines aim to capitalize on an expected return of Chinese tourists in the coming months, including to popular shopping destinations like Paris. Smith said the Franco-Dutch group is gradually increasing flights to Shanghai and Beijing and plans to return to China for at least 50 percent of its 2019 flight capacity.

This comes after a rebound in air travel that is already bringing traffic in regions like Europe close to pre-pandemic levels, fueling an industry recovery. Air France-KLM returned to profitability last year for the first time since 2019, with revenue rising sharply, it said on Friday. The group expects its global capacity to increase further in 2023.

Air France-KLM has been a major beneficiary of the renewed appetite for air travel within Europe and the US since last year. It’s trying to get past the last of its pandemic woes by hitting the $10bn mark.

This will allow the group to roam freely again to make acquisitions, as some of the help came with EU restrictions on purchases and paying dividends. By the end of April, Air France-KLM will have repaid its remaining $2.5 billion in state-guaranteed loans.

“A consolidation is taking place in Europe. We don’t want to be marginalized,” Smith said. “In my view, the smaller independent transport companies do not have a sustainable model for the future. They need to align more closely with an existing larger group or they could become takeover targets.”

Air France-KLM boss Ben Smith

Air France-KLM CEO Ben Smith © Leo Novel

The executive reiterated Air France-KLM’s interest in the Portuguese TAP, which the Lisbon government intends to privatize. The Franco-Dutch airline has “no serious interest” in Flybe, the British regional airline that has collapsed and is being shut down after failing to find a rescuer, Smith said.

Air France-KLM revenue rose 84 percent to 26.3 billion euros, slightly exceeding analysts’ expectations in a Refinitiv survey and matching 2019 levels. The group reported net profit of 728 million euros, according to a Net loss of 3.3 billion euros in the previous year.

Smith also echoed a Dutch government plan to cut the maximum number of flights allowed at Amsterdam’s Schiphol Airport from the end of this year in a bid to reduce excessive noise for local residents. Air France-KLM has “fought it very hard,” he said, adding that the group aims to introduce newer aircraft that will help reduce noise pollution.

“We are very concerned and upset. It sends a terrible message, the Netherlands was built on trade. . . The economic impact of this decision is underestimated,” said Smith. Air France-KLM chief warns of western airlines joining China’s post-Covid travel boom

Adam Bradshaw

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