VZCZCXRO4206
RR RUEHIK
DE RUEHFR #0063 0211538
ZNR UUUUU ZZH
R 211538Z JAN 10
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 8084
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS PARIS 000063 
 
SIPDIS 
 
E.O. 19528: N/A 
TAGS: EAIR ECON EIND ETRD FR
SUBJECT: AIR FRANCE TRAFFIC SAGS, SHIFT IN BUSINESS PLAN 
 
¶1. (U) Summary. Air France-KLM is feeling the economic downturn: 
lower capacity utilization, steadily declining passenger traffic, and 
cargo business stabilized at a reduced level.  An audit showed 20 
million euros (USD 29 million) missing from a fund managed by AF 
employee organizations; the GOF has asked for clarifications.  Due to 
a 40 percent drop in market capitalization in 2009, AF-KLM is no 
longer included in the CAC40, the index of the Paris Bourse.  End 
summary. 
 
Traffic and Capacity Figures Released 
------------------------------------- 
 
2.(U) Air France-KLM' released December statistics January 11 
confirming a decrease in passenger traffic for the twelfth 
consecutive month.  Traffic dropped by 5.1 percent in December 
compared with a year earlier.  The biggest downturn was for European 
traffic (6.4 percent) where capacity utilization averaged 67 percent. 
 For North America, traffic fell by 5.2 percent and capacity 
utilization rose 2.5 points to 86 percent, following a measure to 
consolidate flights.  AF-KLM's traffic fell by 2.3 percent in 
Africa/Middle East and by 4 percent in Asia. 
 
¶3. (U) On the cargo side, AF-KLM  announced an 8.5 percent decline 
after the airline took steps to reduce capacity by 19 percent.  This 
was achieved essentially by consolidating loads to and from Asia. 
 
Update on AF's Business Strategy 
-------------------------------- 
 
¶4. (U) Air France announced two new business strategies.  In light of 
increased competition by low-cost competitors Ryanair and EasyJet, AF 
will reduce its medium-haul flights as of April 1 and eliminate some 
on-board services.  In business and first-class, increased 
competition from European and Asian companies motivated AF to add 
features: new and bigger seats, better in-flight menus, improved 
reservation procedures, after-flight customer care, and the 
introduction of a class between first and business class - Premium 
Class.  In a January 11 press report, Air France confirmed its goal 
to be "the European leader" in business class services by 2013-2014. 
 
Audit Questions AF Employee Managed Fund 
---------------------------------------- 
 
¶5. (U) A January 2010 audit of AF revealed that more than 20 million 
euros (USD 29 million) was missing from a fund managed by AF employee 
organizations.  French Transport Minister Dominique Bussereau 
stressed in a January 11 interview that AF was not state-owned but a 
private company.  However, the GOF is a shareholder (15 percent 
interest) and would like explanations at the earliest opportunity. 
 
6.(U) Air France-KLM is feeling the economic downturn: lower capacity 
utilization, steadily declining passenger traffic, and cargo business 
stabilized at a reduced level.  AF-KLM lost its place on the CAC40 - 
the top40 firms by market capitalization listed on the Paris Bourse; 
AF's market capitalization dropped by 40 percent in 2009.  AF-KLM's 
share price has declined from  from 38 euros in 2007 (when it made 
the CAC40), to 11 euros in December 2009. 
 
RIVKIN