Air France-KLM VP Eric Caron on Working with Corporates

• Effects of terrorism on European demand
• Elevating product standards
• Sustainability initiatives

As with Europe overall, Air France-KLM has taken a hit in revenue following terrorist attacks and political unrest in Europe this year. Even so, Eric Caron, whom Air France-KLM named vice president and U.S. general manager earlier this year, told BTN transportation editor Michael B. Baker that corporate travel demand on a global scale has remained resilient. He also spoke of the investment the carriers are making to further boost corporate market share.

BTN: What's your corporate demand outlook?

Caron: It's been pretty OK. Europe is very different from one country to another. France as a destination has been suffering in the last two months because of the security and the social environment. The power of our network is that we can sell all destinations, so if we see weakness in terms of booking in France, we can sell more Spain and Italy. Globally, the corporate segment is doing well. We have some pressure on the yield and the average value, which is mainly driven by the capacity and supply balance. In 2016, there has been an increase of capacity between the U.S. and Europe, around 10 percent, and the demand has grown around 3 or 4 percent, so immediately you have pressure on fares so you decrease your fares to stimulate demand further. It's not only for Air France-KLM; it's the JV and the competitors.

BTN: Where are you seeing growth?

Caron: Last year, if you look at the oil and energy sector, it was down in double digits. But all in all, we had a slightly positive corporate revenue evolution, meaning we've been able to compensate for the decrease of oil and energy in other sectors like pharmaceutical or banking. Now, with Brexit, we are not sure what that's going to be. There are also some sectors of activity that are more dynamic, like all the IT, which is why we've invested in the West Coast of the U.S. We have added more flights out of San Francisco. We've put more capacity on Los Angeles. It's growing and demand is growing, and we've been quite successful in catching our fair share.

BTN: What are your other strategies to gain market share?

Caron: The investment that Air France-KLM has put in the product over the last three years has been enormous. It's not only the seats. There's the lounge investment in Paris and Amsterdam, the renovation of the lounges we have all over the world. If you look at Skytrax results, in three years Air France has gained 26 places and almost 15 for KLM. We believe that it is really the way to go because we have to differentiate from the competition, especially when you have more competition from low-cost airlines and other legacy carriers. It's part of our strategy to bring the product level to the higher standards. We have all invested in the gastronomy in working with famous chefs, Daniel Boulud in the U.S. and world-class sommeliers for wine. When we discuss with corporate clients, they are happy, and we measure our performance in term of market share and knowledge.

BTN: Is new business coming from existing clients or from adding new ones?

Caron: It's really the two in parallel. When we have existing clients, we want to grow with them and increase market share. We have also a set of [prospective clients] which is why you have different programs for our corporates, depending on the size. We have [Delta corporate loyalty program SkyBonus through a joint venture with the carrier] or the corporate agreements or multinational agreements, and it's based on how much business you bring, and we can give in return some discounts and additional services.

BTN: What role does your partnership with Delta Air Lines play?

Caron: For the U.S. market, the partnership with Delta is really crucial. [With the partnership] you can offer to your customers all destinations in the U.S. and Europe, and you can fly Air France, KLM, Delta, Alitalia or whatever and combine. You can fly from Denver to somewhere in Europe via Amsterdam and come back via Paris or Atlanta. No other airline has reached the level of integration we have reached. When we go and meet a corporate customer or travel agent, it's only one face [to the market]. We [lay out the] different values and products, [but] it's the same goal in terms of products and excellence.

BTN: What other recent initiatives are you touting to corporate clients?

Caron: On Air France, we have launched what we call Night Service. Basically, the concept is: The flight from New York to Paris is pretty short, so if you leave at 9 in the evening, by the time you have your dinner on board and get to sleep, then you have three or four hours to sleep and then you arrive in Paris. Now, we've been offering on the last two flights out of JFK the possibility for the customers traveling business class and La Première [private suites] to have their dinner in the lounge. It's exactly the same meal they would have onboard, but they can have it in the lounge, have the same wine lists, and when they get on board, after takeoff, they can go to sleep and have a proper night.

BTN: What are you doing around sustainability?

Caron: We have a lot of initiatives, like recycling the uniforms of the cabin crew to make the carpets of the KLM aircraft. We also have a lot of investment in the fleet to have more fuel efficiency. We already have biofuel flights in Europe between Oslo and Amsterdam and between Paris and Toulouse. There will be a biofuel flight [to] the U.S., and we will announce that as of September.