Air France wants to meet different demands. It wants to expand their differentiation strategy (Porter’s Generic Strategies) and their customer segments (Business Model Generation) by improving their low cost carrier, “Transavia airline”. In order to succeed, Air France needs to lower their costs and expenses such as hiring pilots and stewardess at lower wages. If Air France cannot reduce their costs, they will not be able to offer cheap prices to customers. If they insist on offering cheap airline prices, their cost base will be very similar to the carrier thus profit margin will be minimal which would cause a loss instead. It seems apparent that Air France has a plausible plan, but why does it not execute it?
Air France’s pilot on strike.
Pilots in France like teachers in British Columbia have unionized employment contract and they object to earning less in the new Air France budget carrier. This strike is comparably similar to the teachers’ strike that happened few weeks ago in British Columbia; their affect is much greater than we can imagine. About 50% of Air France’s flights have been canceled, and a troublesome delay happened. In my opinion, there is no win-win situation for Air France. If Air France pays Transavia pilots the same as Air France, it would make their budget of Transavia unprofitable. Unless Air France pilots are willing to sacrifice a significant amount of their wages, if not the airline will not be able to ameliorate Transavia, and Air France will eventually close down.
Sources: http://www.bbc.com/news/business-29361699
http://www.bbc.com/news/business-29353622
http://www.businessinsider.com/air-france-strike-implications-2014-9
Image: http://news.bbcimg.co.uk/media/images/77802000/jpg/_77802173_77802172.jpg