January 17, 2020 / 2:59 PM / 3 months ago

Air France-KLM CEO sees more room for fleet cooperation

FILE PHOTO: Benjamin Smith, Chief Executive Officer of Air France-KLM, speaks during a ceremony as Air France takes delivery of its first Airbus A350 airliner at the aircraf builder's headquarters of Airbus in Colomiers near Toulouse, France, September 27, 2019. REUTERS/Regis Duvignau/File Photo

PARIS (Reuters) - Air France-KLM (AIRF.PA) boss Ben Smith said on Friday that a plane order swap last year would simplify the two airlines’ operations and reduce costs, but acknowledged that their fleet coordination was not yet as efficient as he had hoped.

Smith took over as chief executive in September 2018, pledging gains from closer integration of the French and Dutch carriers. In a surprise move last year, amid KLM resistance to governance changes, the Dutch state bought a 14% stake in the group to match the French government’s holding.

While the order swap of KLM Airbus (AIR.PA) jets for Air France Boeings (BA.N) in June showed a high level of coordination, Smith told the Anglo-American Press Association in Paris, closer cooperation could bring the group more “purchasing power” as the operator of more than 500 aircraft.

“Are they operating as efficiently as I thought possible? No,” he said of the airlines’ fleet planners. “Is there more to do? I think yes.”

While each airline still has its own fleet team, Smith added, decisions need approval from the group board. “We’ve elevated the decision-making process a bit earlier on, to ensure there’s more synergies.”

Under a mid-term plan presented to investors in November, Smith has pledged to improve Air France profitability and narrow the gap with its stablemate. The French carrier posted an 8.2% operating margin to KLM’s 16.2% for the third quarter.

Reporting by Laurence Frost; Writing by Richard Lough; Editing by Kevin Liffey and Alexander Smith

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