Air France Klm Strategic Management

Topics: Air France, Northwest Airlines, Airline Pages: 22 (7210 words) Published: February 17, 2011
1 Introduction of Air France – KLM4

1. Governance in Air France – KLM 4
1.2 Turnover and competitive position5
1.3 Air France – KLM mission and vision5
1.4 Risk and challenges6

2 External diagnoses6

2.1 The industry life cycle 6
2.2 PESTEL (external environment)8
2.3 Porters 5 forces + 1 (Air France - KLM)9
2.4 Opportunities, Threats and Key Success Factors11

3 Internal Diagnoses12

3.1 Air France, resources and competences 12
3.1.1 Core competences13
3.1.2 Cost efficiency14
3.2 Value chain and processes16
3.3 Strengths and weaknesses18

4 Strengths/weaknesses and Opportunities/threats (SWOT)19

5 Recommendations21

5.1 Potential alternatives 21
5.2 Feasible analysis21
5.3 Recommendations of adapting, Implementing and planning22
5.3.1 Cost reductions on short-haul flights22
5.3.2 Use the strong brand in favor of the external influences23 5.4 Develop strategic capabilities24
5.5 Strategy implementation: turnaround vs. adaptation strategy25

We have chosen following framework for the assignment about Air France – KLM:

What is our (Air France – KLM) competitive advantage, how to consolidate it and ensure its continued existence? How to grow on this competitive advantage?

We are aware of Air France – KLM has several different and important SBU’s in their entire organization portfolio, but because of page restrictions the assignment will mainly focus on Air France –KLM’s short-haul business unit. The matrix below illustrates the different business units. The one pointed out in red is the short-haul flights (intra Europe) SBU 1, which is the unit this assignment primarily focuses on.

1 Introduction of Air France – KLM
Air France was founded back in 1933 through the merger of other French airline companies called Air Orient Air Orient, Compagnie Générale Aéropostale, Société Générale de Transport Aérien (SGTA, the first French carrier, founded as Lignes Aériennes Farman in 1919), Air Union and CIDNA (

After the Second World War Air France was nationalized where the government had 70 % of the company’s shares. In 1976 the company introduced the Concorde, which operated between Paris Charles de Gaulle to New York City. On 12 January 1990, the operations of all government owned airlines, Air France, Air Inter, Air Charter and UTA, were merged into the Air France Group. A new holding company Group Air France was set up by decree on 25 July 1994 and was implemented on 1 September 1994. It had majority shareholdings in Air France and Air Inter (renamed Air France Europe). In 1997 Air France Europe was fully absorbed into Air France. On 10 February 1999 the French government partially privatized the airline on the Paris stock exchange. It became a founder member of the Skyteam Alliance in June 2000.

On September 30, 2003, Air France and Netherlands-based KLM (Royal Dutch Airlines) announced the merging of the two airlines, the new company to be known as Air France-KLM. The merger became reality on May 5, 2004. Former Air France shareholders own 81% of the new firm (44% owned by the French government, 37% by private shareholders), while former KLM shareholders hold the rest. The French government's share of Air France was reduced from 54.4 per cent (of the former Air France) to 44 per cent (of the current Air France-KLM), thus in effect privatizing Air France. In December 2004 the French state sold 18.4% of its equity stake in the Air France-KLM Group, reducing its stake to just under 20%.

1.1 Governance in Air France - KLM
The Board of Directors in the Air France Group is divided into 3 different categories with 15 members in total. It’s represented with 10 directors appointed by the shareholders, 2...
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