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Air France eyes China’s booming travel market for revenue increase

 Air France eyes China's booming travel market for revenue increase 法航来中国淘金 在中国布局.jpg

Air France is looking to China's booming market for international travel for new sources of revenue, the company's chief executive officer said Wednesday, as the carrier struggles to stem losses and slash costs globally.


Air France Chairman and Chief Executive Frédéric Gagey said one measure will be to put bigger airplanes on key routes out of China. The company is targeting early 2015 for daily deployment of Airbus 380 aircraft on Shanghai to Paris flights, up from four a week currently. Air France introduced the superjumbos, which can carry more than 500 passengers, on the route last fall. A380 flights from Hong Kong will start May 27.


Air France said, Beijing also 'could be a good candidate' for deployment, but gave no time frame, citing infrastructure considerations at the capital's airport.


China is Air France's second most important long-haul market after the U.S., accounting for around 10% of revenues from such flights.


Brokerage CLSA estimates 200 million Chinese will venture abroad annually by 2020, double the 100 million in 2013. European capitals, including Paris and Amsterdam, are among the most popular destinations.


Another possibility is to increase the frequency of flights from China's secondary cities, many of which are located in the country's interior.


'There is a huge demand from all these provinces outside of big cities for a presence by European airlines,' said Mr. Gagey.


In 2012, Air France began flying to Wuhan, a sprawling metropolis of more than eight million people and a hub of Sino-French investment. The capital of Hubei province is home to Dongfeng Motor Corp., which recently took a major stake in French struggling car maker Peugeot Citroën.


As a group, Air France-KLM SA, also flies to other emerging inland cities, such as Chengdu, and smaller coastal destinations, such as Hangzhou and Xiamen.


'Compared with big competitors out of Europe, development of their coverage of the Chinese market is far more limited,' he said.


The group operates 88 flights a week to Greater China–including Taipei and Hong Kong.


Air France-KLM doesn't serve all destinations daily and a goal was to increase frequency on these routes for optimized operations, he said.


Success in China could help the airline become profitable. In the first quarter, parent Air France-KLM SA, had operating losses narrow to EUR445 million ($619 million) from EUR 532 million a year earlier. Revenue was EUR5.55 billion.


Last September the company said it was speeding up job cuts and moving more of its European routes to its low-cost Transavia.


The carrier is also exploring other new destinations in China but has no concrete plans at this stage.


Air France-KLM's general manager for greater China, Bas Gerressen, said a recent crackdown by the Chinese government that discourages ostentatious consumption by officials has influenced its business. Such officials were making fewer trips and more had downgraded to cheaper travel classes, he said.


Still, overall the company could compensate by tapping other kinds of travelers such as entrepreneurs and China's growing number of individual travelers. The group's flights between China and Europe typically flew with more than 90% of seats occupied, Mr. Gerressen said.



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