One-on-One with Air France-KLM CEO Pierre-Henri Gourgeon: Air France Venture Erasing Delta Distinctions

Fresh off the landing of Air France's first Airbus A380 flight from Paris to New York late last month, Air France-KLM CEO Pierre-Henri Gourgeon, nearing the Jan. 1, 2010, one-year mark at the airline group's helm, spoke with BTN senior editor Jay Boehmer about the carriers' joint venture with Delta Air Lines, the "horrible" demand environment and why the next phase of the U.S.-EU Open Skies negotiations is of little importance to his airline.

Business Travel News: Are you now sharing all costs and all revenues on transatlantic flights with Delta, as envisioned in your joint venture?

Pierre-Henri Gourgeon: Yes, exactly. It's what we do, and it works pretty well. I think we see the result already because we have an upgrade on our load factor from the United States on the North Atlantic for Air France, and we see that it's more than for KLM because KLM was already in a joint venture with Northwest. Air France was not. We think that the benefit comes from the joint venture.

BTN: How much of that incremental load factor do you attribute to the joint venture?

Gourgeon: Our increase for the first half is 4 points, which is very significant. We're at 87, 88 percent.

BTN: Do you feel you've already accomplished metal neutrality, in which Delta sells Air France on the Atlantic as if it were its own airline and vice versa?

Gourgeon: With the joint venture, you cannot be anything but metal-neutral, and it's stupid not to be metal-neutral. Revenue management and pricing for the North Atlantic joint venture already is done in Amsterdam by a team of 16 people. In that team, you will find people from Air France, Delta and KLM. They are all working together for the joint venture, and in their mind it's one airline. They don't care which flight has to be filled and which airline is operating that flight because they understand that everything is shared.

BTN: Is it a similar arrangement on the network planning side?

Gourgeon: That's being done jointly as well. It's very efficient because the point of the joint venture is to find a real way to avoid internal competition. Internal competition is nonproductive.

When you're in a joint venture, network planning is very simple. For example, if we were to say, we're going to Atlanta then after that the passenger is taking a flight to Phoenix, why don't we open a flight from Paris to Phoenix? We can open Paris-Phoenix if, for example, the traffic reaches a point where obviously we can fill an aircraft. Then the good thing would be to open Paris-Phoenix, if it is positive for Air France-KLM and it's positive for Delta. If it's forced to transfer some passengers out of Atlanta and bypass Atlanta it could be negative for Atlanta and if it's negative for Delta, then it's negative for Air France-KLM. It's as simple as that.

BTN: If something is bad for one carrier, it brings down the group?

Gourgeon: Yes, because we are the same. It's interesting to see. The joint venture has been possible between Delta-Northwest and Air France-KLM because of the experience of Northwest's joint venture, which it had first with KLM. That has been very positive.

Delta CEO Richard Anderson is the former CEO of Northwest, so he knows very well the story of the joint venture. He believes in it and knows that it is extremely efficient, but he also knows that it's very difficult because you need a lot of trust to overpass the obvious difficulties of working so closely with another airline. If it's not yours, how can you be sure it's doing well? But if you have done it, then you know it's possible to do it. The same for us. The people from KLM told us to look at the results. We have seen the results, and on the North Atlantic, KLM is doing better than Air France.

We understood that the joint venture is really the answer. It takes time and a lot of effort to go through the obstacles and finally put it to work. Some of our competitors can now legally do a joint venture, but it's not obvious that they finally will do it, because it is so difficult if you have the culture of two companies, one against the other. Then it's very difficult.

BTN: What are you seeing in the demand environment, especially points of sale in France or even the Netherlands?

Gourgeon: It's difficult to find the right vocabulary. You would say it was depressed and it is still depressed, and horribly by figures with two digits, but probably a bit less depressed today than it was. You need a microscope to see the difference because it's horrible compared with horrible, but one is a bit less horrible than the other one. We can say that there is slight reduction in the degradation.

BTN: The European Union and United States are engaged in the next round of Open Skies talks. What do you expect to come of that?

Gourgeon: The big question is one of ownership, which is supposed to be discussed. For the time being, whether it's a success or not, I cannot say for us that it is very important. It's probably more important for the future, for the long term, but right now we have an excellent relationship with Delta.

For example, I will not go for anything else in the United States. I will not say to Delta that we intend to invest in another airline in the United States. I would guess it's the same the other way. Our joint venture has given us the same effect of consolidation, and the rest is so different, and domestic U.S. traffic is so different from the traffic in Europe that we don't really look for that. Let's wait and see. It's certainly a long-term necessity and it will come. Whether it's this year or another year, it's not very important.