Air France-KLM: Do the strategic choices of development of Air France-KLM enable the group to ensure a sustainable and competitive place to face the new difficulties of the market?

Résumé du document

Organizational development strategies of a company are carried around several axes. Indeed, it is needed to take into account the external and internal sources of change, the steps through which it passes, the context, the forces involved etc. to finally determine the kind of strategic evolution needed.

The context and environment of Air France KLM is unfavorable for the group's development due to the rise of the price of fuel, the slump that has severed during the last years and the emergence of powerful airlines like in the Middle East or in Asia. The group which is the second leader behind the German airline Lufthansa in the European aviation market has known during the last financial years losses in its income and is largely indebted.

Even though the group has distinctive competencies such has a large network or brand notoriety, the group has to evolve in order to cope with today's market. The group has already started to operate some changes in its strategy when for instance both Dutch and French companies merged in 2004 which created synergies but also cultural clashes, or the different programs of cost cutting.

Extraits

[...] With a high-demand and the purchasing power increasing in these countries, developed countries are seeing their growth slowing down and airlines are struggling and trying to create new lines towards emerging countries. Recession or downturn in the economy means unemployment. Indeed, unemployment in developed countries is becoming increasingly important, a nd thus the purchasing power is decreasing and the demand in the aviation sector more fragile. Sociology OPPORTUNITIES The development of airline networks has enabled the globalization of travel. Indeed, even seniors have been seduced by the comfort and convenience of air travelling; there are prices for all the type of consumers. [...]

[...] On September the capital of Air France-KLM is made of 300,219,278 shares[4] divided like below: - French government: - Employees of the group: - Floating: III Today's situation of the Group On this report we will focus on the business unit of transportation of passenger as it represents around 80% of its turnover. Internal analysis a. Value chain VALUE CHAIN OF PORTER Support activities Infrastructure Air France - KLM is organized around a simple structure: a holding company with two airline subsidiaries. [...]

[...] This success is due to of the mobilization of the employees in all sectors of the group to contain procurement, improve productivity and the restructuration of in some business units. In 2007-2008 the gearing ratio was This shows us how Air France-KLM has since then been independent to loans and operating cash flow the sell off assets were not enough to keep the operations running. Cash Position (treasury) Even though the group is indebted, the company can count on its treasury and cash flow to finance its investment. [...]

[...] The takeover of KLM The Air France-KLM merger led to the creation of Europe's leading airline company. The successful exchange offer for KLM is based on the concept of one group, two airlines and three businesses allowing its strategy to move quickly. Three key priorities can be distinguished: - The perpetual search for cost control for each company, - The implementation of synergies, - Development of the SkyTeam alliance with the simultaneous entry of KLM, Northwest Airlines and Continental Airlines In late November 2004, after the merger had been done, Jean-Cyril Spinetta, CEO of the group, and Leo Van Wijk, the CEO of KLM, presented a profit, for the first semester, of 296 million euros, an increase of over the previous year. [...]

[...] At the creation of the company, in 1933 there are a large number of competitors and the profitability of this sector is unsatisfactory and financial assistance of the state is essential to allow airlines to continue and expand their operations. In May 1933, the grant contracts of several French airlines are expiring and it is in this context that imposes the idea of alliance. Britain and Germany had then already gave the example of successful merger with, respectively, in 1924 Imperial Airways and Lufthansa in 1926. [...]