The chief executive of the Air France-KLM Group, Benjamin Smith, says the French flag carrier Air France is already in “crisis mode,” but while the airline is now in “unchartered territory” as a result of the Trump administration’s on-off tariff policy, dealing with various crisis isn’t anything unusual for the aviation industry.
Speaking with Bloomberg, the Canadian businessman who became the first non-French chief executive of the Franco-Dutch airline group in 2018 admitted that Air France was already seeing “softness” in its transatlantic economy cabin.
“On the transatlantic [business], we are seeing relative stability in the premium cabins, and we’re seeing slight softness in the economy cabin but nothing as of today that is causing us to shift capacity,” Smith said during the interview that aired on Bloomberg on Wednesday.
When questioned about what effect President Trump’s tariffs might have on his business, Smith continued:
“Well, in a recession, travel is one of the first industries to get hit. I think after COVID, we’ve seen travel reposition as one of the priorities of many consumers. But with fuel being down, at least for us, and we look at how this uncertain time could play out on our bottom line, relatively, we’re already in crisis mode.”
“This is a different, unchartered territory for us, but we’re used to crisis,” Smith added.
For the time being, at least, Smith insists that there is no reason for Air France to cut capacity on its North American route network, but if necessary, the airline could shift capacity to Latin America or Asia.
The airline could also defer aircraft orders and implement cost-cutting measures, although Smith noted that Air France didn’t have massive growth plans like some of its competitors.
Working in the airline’s favor are falling oil prices, one of the single biggest expenses for an airline after employee costs.
At the end of last month, Virgin Atlantic became the first international carrier to voice concern about weakening demand for transatlantic travel from North America to Europe, although the airline’s chief financial officer, Oliver Byrns, did not provide solid figures on the extent of the slowdown.
On Wednesday, major investor Delta Air Lines said it was “actively managing costs and capital expenditures” after witnessing a slowdown stemming from “broad economic uncertainty.”
Delta noted, however, that premium and international demand remained healthy even as domestic and Main Cabin demand started to fall away.
For Air France, Smith says the airline is managing to fill its transatlantic Economy cabins by slashing prices, while premium cabin demand remains strong, especially among US travelers, who fill up to 50% of the airline’s premium cabin capacity.
