Air Austral abandons plans for all-economy A380 that would ‘endanger the existence of the airline’: CEO

July 30, 2013

Comfort

Airbus A380 Air Austral abandons plans for all economy A380 that would ‘endanger the existence of the airline’: CEO

Indian Ocean carrier Air Austral will not take delivery of all-economy A380s as the large capacity without premium traffic threatens to cannibalise its network and ultimately “really endanger the existence of the airline”, CEO Marie-Joseph Malé recently told the APEX Editor’s Blog on the sidelines of Terrapinn’s Aviation Outlook Africa Conference in Johannesburg. He firmly rebuffs reports the order is cancelled and says “all options” are on the table, including a mixed-configuration A380.

Air Austral made headlines in 2009 when it agreed to purchase two A380s configured with 840 seats, which would have made it the first to outfit the A380 with anywhere near its maximum certified capacity of 853 seats. The order was symptomatic of what Malé describes as Air Austral having “really exponential growth which didn’t make sense and was evidently loss-making.”

Malé joined Air Austral in 2012, when the carrier was already pruning its network following heavy losses. The carrier has a leisure bent and was impacted by rising fuel costs depressing holiday travel already weakened from economic problems in continental Europe, its core market. Cut were ultra-long-haul flights to Sydney that continued to New Caledonia. Sold were a 777-200LR before it ever flew with the airline as well as an older 777-200ER – not insignificant disposals for a carrier with only four widebodies today.

Once in office Malé looked at the A380 order and believed that “The coexistence of denisifed [A380s] with the current existing network would cannibalise the current network and would really endanger the existence of the airline,” he says.

The cannibalisation concern was that an all-economy configuration would deprive the carrier of premium revenues. “That’s going to affect the profitability, which is already at stake,” Malé says.

“You have to look at high density planes and what will be the impact on the remaining. If you feel the group is going to be impacted because you cannibalise the quality of the traffic, you have to question it.”

Air Austral has found particular success with premium economy as it has “a segment of clients that really cannot pay for business but want some level of comfort for flights around 11 hours,” Malé says about the typical time of its long-haul flights. Premium economy is in a 2-4-2 configuration while economy is in 3-4-3.

Business class is less significant. The cabin seats 18 on the carrier’s three 777-300ERs in a tight 2-3-2 configuration. Malé thinks the business class load factor of 55-60% can be improved but does not think a retrofit programme to reduce seats would make sense.

Also a factor is marketing. Malé views the business cabin as a produit d’appel, one that may not be critical on its own but is “pulling up the whole company in terms of quality”, he explains. The positioning of Air Austral, with angled lie-flat business seats and a tight 10 abreast economy configuration, may be different from Lufthansa, but the principle is the same: Lufthansa says its most premium product, first class, is “transferring luxury to the rest of the brand”.

What about the possibility that anyway the A380 is filled – all economy, mixed configuration – it represents too much capacity for the carrier? Its La Reunion-Paris service is operated 12 weekly at the peak of summer with flights scheduled close to each other, making them a possible candidate for the A380, as originally envisioned. But no other route sees nearly as much capacity and such small sub-fleets are hard to justify. Surely Airbus would be amenable to a change in configuration rather than losing an A380 customer? Malé only says, “We are still in discussions. I cannot elaborate.”

He does comment that as part of all options being opened, the A380 order could be converted to smaller aircraft. These could be more appropriate especially with Air Austral, once relatively reclusive and strongly French, seeking a more international role with multiple partners, a strategy Malé would understand given his previous time as managing director of SkyTeam.

There are three parts. First, Air Austral has already established codeshares with regional peers, like on Air Mauritius’ service to Australia, which Air Austral cut. Second, Air Austral would like partnerships at long-distance ports like India and Thailand. The third phase entails returning to regional partners to see if they would like to go deeper than codesharing without equity exchanges. There is precedent: Prior to Etihad Airways taking a stake in Air Seychelles, Air Austral was going to operate long-haul routes in cooperation with Air Seychelles.

This future vision of greater Indian Ocean airline cooperation is sharply different from that of being highly independent and flying dense A380s. “In today’s world what we need to continue is to develop through partnerships,” Malé says. “We have political will to do it together.”

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About Will Horton

Originally from New York City - now lives in Hong Kong. An active follower of the air transport industry interested in how the Asia-Pacific region's emerging airlines are addressing the passenger experience given their high-fuelled growth. Will also writes for the Centre for Aviation. He previously worked for Flightglobal.

View all posts by Will Horton
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5 Responses to “Air Austral abandons plans for all-economy A380 that would ‘endanger the existence of the airline’: CEO”

  1. Rob Says:

    Yeah, sensible choice in the end. They dodged a bullet there.

    Reply

Trackbacks/Pingbacks

  1. Air Austral Cancels All-Economy Class Airbus A380s - Airfare News - August 4, 2013

    [...] Réunion (Indian Ocean) based airline, Air Austral, has announced that it will not take the delivery of its all-economy class Airbus A380 aircraft as the aircraft threatened to cannibalize its existing network and “threaten the existence” of the airline, according to the Apex Aero Blog. [...]

  2. At 652 seats, Transaero’s A380s could top all others | TokNok Multi Social Blogging Solutions - October 18, 2013

    [...] hit a financial rough patch. And, even if the airline does eventually take delivery of the A380, the Airline Passenger Experience Association reports that Air Austral has backed off from the plan for a maximum-density seating [...]

  3. At 652 seats, Transaero's A380s could top all others | RocketNews - October 19, 2013

    [...] hit a financial rough patch. And, even if the airline does eventually take delivery of the A380, the Airline Passenger Experience Association reports that Air Austral has backed off from the plan for a maximum-density seating [...]

  4. At 652 seats, Transaero’s A380s could top all others | Wales Air Forum - October 19, 2013

    [...] hit a financial rough patch. And, even if the airline does eventually take delivery of the A380, the Airline Passenger Experience Association reports that Air Austral has backed off from the plan for a maximum-density seating [...]

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