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Air France-KLM ordered Airbus SE narrow-body jets worth $5.5 billion and announced the retirement of its A380 superjumbos as Chief Executive Officer Ben Smith reshapes the fleet to cut costs and boost margins.
The group’s French arm will buy 60 A220 planes and place options on 30 more as well as acquisition rights for an additional 30, according to a statement Tuesday, marking one of the biggest deals for the program since its purchase by Airbus from Bombardier Inc. last year. The double-decker A380, in its last years of production after a slump in sales, will be phased out by 2022.
“This is a very important next step in Air France’s transformation, and this evolution in Air France’s fleet underlines the group’s determination to attain European airline leadership,” Smith said in the statement. He praised the aircraft for its performance and comfort.
CEO Smith, who took over in September, is turning his attention to fleet requirements that had been put on hold due to labor unrest at the airline. The new, more fuel-efficient planes will help pare operating costs as the Canadian executive remodels the group’s short-haul business to take on network rivals and low-cost competitors including Ryanair Holdings Plc.
The A220s will replace 51 Airbus A318s and A319s with an average age close to 17 years that operate a significant chunk of Air France’s intra-European operations such as Paris-Rome flights and domestic routes where discounters and high-speed trains have been grabbing market share. Delivery of the planes is expected to start in September, 2021.
Smith has already taken steps to bolster short-haul margins with cuts to under-performing services. The model, previously the Bombardier C Series, is made in Canada but marketed by Airbus following its takeover of a program designed to take on its own A320 family of jets and the Boeing Co. 737.
Air France-KLM is expected to report a drop in operating profit when it publishes second-quarter results on Wednesday as higher fuel prices, weaker economies and falling fares squeeze margins.
Smith had previously decided to upgrade the cabins of the company’s 10 A380s, despite a decision not to renew leases on three of them. He said at the Paris Air Show last month that the company was mulling how long to keep operating the plane.
Air France-KLM is considering the much smaller Boeing 787 and Airbus’s A330neo to replace the jets, French newspaper La Tribune has reported. Airbus decided in February to stop making the A380 after double-decker failed to win broad support from airlines.
©2019 Bloomberg L.P.
This article was written by Ania Nussbaum from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.
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