XL Airways France is a French airline active in the leisure and charter market. Founded back in the mid-1990s as Star Europe the carrier subsequently adopted the name Star Airways in 1997. It later became part of XL Leisure Group and got its current brand, XL Airways France, in 2006. After having survived the shutdown of the XL Airways Group, the Paris-based airline is owned by X-Air Aviation since 2012.
XL currently has a fleet of three Airbus A330-200s of which one is operated by Air Transat and as well one Airbus A330-300 and two Boeing 737-800s. The six-unit-strong fleet has an average age of 7.2 years.
During the APG WorldConnect conference ch-aviation´s Managing Director Thomas Jaeger had the possibility to talk with Luc Bereni, Commercial Director at XL Airways France, about the airlines’ current business and its future plans.
On your scheduled long-haul services, do you still rely heavily on tour operators or have you been able to build up enough direct distribution by now?
The split is now around 50:50. Of our total revenue of €300 million per year, half comes from tour operators through direct contracts while the other half comes from GDS and direct sales on our scheduled services.
A lot of our flights serve passengers booked via tour operators as well as those who have booked directly with us, and of course the routes vary a lot in terms of passenger split. On flights to the Dominican Republic or to Cancun, around 80 percent of the passengers come from tour operators. In contrast to this, our flights to the United States are driven almost entirely by direct sales with just two tour operators being able to book special fares on these flights and not a single one with committed capacity.
You offer Business Class on your two A330-200s but then decided to go for a high density, all-Economy configuration when you took delivery of your new A330-300 from Airbus in 2014. What was the rationale behind this decision? Are you planning to eventually transition to an all-Economy layout on all aircraft?
The Airbus A330-200 can fly longer routes than the Airbus A330-300 which has a range of approximately 10 hours flight time. But since demand for our premium product is much lower on routes below 10 hours, we decided not to equip the A330-300 with premium seats.
Our A330-200s are now mostly used on longer routes like to San Francisco, Reunion, or Cancun and also on routes where there is demand for Business Class like to the Bahamas.
We don’t have any plans to reconfigure them into all-Economy aircraft.
Your commercial strategy seems to be different from most other European leisure carriers; you build long-haul capacity with external aircraft in the summer and wet-lease out short-haul capacity in the summer. What are the main reasons for this approach? Is this unique to the French market?
At the moment we see good opportunities to grow in the long-haul market. Here we can offer non-stop services and good fares while also offering good service. In essence, we can deliver good value for money while still being profitable. We also have a good balance on our long-haul flights with routes to North America performing very well in summer while destinations like the Caribbean are popular in winter. Since our summer business fares better, we have to lease in additional capacity.
On medium- and short-haul routes, the situation is more difficult – there are many competitors, in both the scheduled and charter sectors. As with the scheduled market, in the charter market there are not only other French carriers competing with us like Europe Airpost, but also operators from other countries such as Travel Service Airlines.
With the exception of July and August, many aircraft are idle from Tuesday to Thursday in France because there are not enough contracts. But the Boeing 737-800 flying on an ACMI contract with Luxair, is leased out seven days a week for the whole summer season so it performs more flight hours thus generating better financial results in the end.
In the winter, the Boeing 737s perform few regular flights and are often used on an ad-hoc basis – a niche where we have become very successful.
- Departing XL Airways France Airbus A330-300 – Copyright: Airbus
There is heavy competition on flights to France’s overseas departments in the Caribbean and Indian Ocean; markets you have only entered in recent years. Why did you join the battle and how have things turned out for you?
While the French Caribbean is a strong market, it might not be versatile enough to sustain four airlines all year-round. So as the latest entrant into that market, we have decided to only operate seasonally and thus do not fly between September and December.
As for Reunion, we fly there not only from Paris but also from Lyon and Marseille. This is kind of a niche market for us.
Do you believe Air Austral will really be able to pull off a daily A380-800 operation on the CDG-RUN route?
I have not heard anything about Air Austral and Airbus A380 for a long time.
Other long-haul leisure carriers that are owned by big tour-operator groups, like Condor/Thomas Cook Airlines UK and Corsair, began entering into interline agreements years ago and now use other airlines to feed into their respective services. Do you already cooperate with any other carriers and if not, do you plan on moving in that direction?
First of all, we too were part of one such ‘big’ leisure group as you might well remember – the XL Leisure Group was our 100% shareholder when they bought Star Airlines back in 2006 and they were present in three European countries: the UK; Germany; and France. But we all know what happened. (Editor’s Note: the Group declared bankruptcy in 2008 with the airline sold off to the Straumur-Burdaras Investment Bank.)
But we still maintain a degree of integration because we own two French tour operators: Crystal and Héliades.
In general, and this was also the case with XL Leisure Group in the past, the tour-operator group owns the airlines. In our case however, the opposite is true because we own the tour-operators and are therefore able to keep their expansion in check. We limit them to ensure we do not compete too much with our other customers which are the other big French tour operators.
Regarding your question about interline agreements, we of course look at every opportunity that presents itself in the market and that includes every possible kind of alliance and/or strategic cooperation. But at the moment, we are extremely content with point-to-point operations not only because it is a simple model, but also because every cooperation agreement comes at a cost. However, while we are content with our present point-to-point business model which has no alliance participation, that does not mean that we are against the principle. It simply means we prefer to be more cost-efficient. Small is beautiful and simple is beautiful in terms of IT, passenger assistance, connections etc.
So at the moment we have not been through this process because we are strong enough in our market sector and we prefer to concentrate on our simple model.
Well understood. So if I am a Crystal customer and live in Marseilles, how do I get to my flight from Paris? Do the tour-operators sell SNCF connections or do they book Air France flights separately from long-haul flights?
Well, there are a lot of expensive connecting models one of which I can think of is the TGVs (French high-speed trains) where they offer a product called ‘TGVAir’ which a lot of “rich” airlines already use – including a lot of our competitors. But believe me it is not “free”. We would probably be stronger in the provinces if we had such agreements when you consider the benefits of competitive ‘expensive’ models (i.e. connections and alliances) and this applies not only to airlines, but also to trains and especially the TGV.
At the moment, a customer who lives in Marseilles and wants to fly to Pointe à Pitre with us has to book his own trip to Paris or has to ask his travel agent to sort the connection out for him. So of course there is a price to pay to keep our prices low.
But we are still very interested in the provincial market which means that as soon as we have identified a potential opportunity we would be willing to open up flights there.
Don’t forget we have non-stop flights from five of France’s main regional airports (Lyon, Marseilles, Bordeaux, Toulouse and Nantes) to Punta Cana. We fly from Marseilles and Lyon to Réunion, and we are also studying adding en-route stops at French provincial airports on routes from Paris to various other destinations as soon as we are sure to have at least 200 passengers boarding, so more than half of an A330.
Part of our model means that we are probably more efficient than other carriers which are bigger and stronger than us but which definitely have higher costs than ours.
This next question is probably meaningless by now as consumers forget quickly, but do you feel that the XL brand was damaged by your German and UK sister carriers going out of business some years ago? Have you ever considered rebranding?
Fortunately for us, all you read about them on the internet is about the collapse of XL UK and stories from their passengers. Of course we remember in 2008 when, due to the closure of XL UK, thousands of passengers were stranded around the Mediterranean and even in Florida and that could have seriously damaged our image. But luckily, we focus on the French market and none of the news of those events made it back there.
The closure of XL Airways Germany was quite clean – it was a full charter model with all tour operators involved having already been informed by the time flights ceased. The closure of XL Airways Germany did not harm any individual passenger.
The XL brand is a very nice brand. We bought the XL.com domain name and XL Airways brand from the assets of the bankrupt XL Airways UK. So really, it is something we now own not to mention it is also a very valuable brand as there are not too many two-character domain names in the world and XL speaks for itself. XL.com and XL Airways really mean something, especially when developing our business to the United States.
How does it feel to be independent again after all of these years in ownership “limbo“? Where do you stand right now on that front?
Without a doubt, XL will have a new owner during the next twelve months. That’s a given. We just hope that we have a long-term owner, not another short-term one, because this airline’s ownership history is a nightmare.
While we are very proud to still be in business and to have been nearly always profitable, believe me it is far more difficult if you do not have a strong owner or if you have an owner who interferes with your plans or who disappoints you, as has been the case at XL Airways for several years.
We first hope that we will be able to find an owner that will stand beside us, that shares our vision and development plans, even if we aren’t proposing to double the size of the company overnight. In all, finding an investment company or owner, whether from the airline/tour-operator industry or not, who really shares our vision and supports our development, will be something very special not to mention new to us.
Of course in tandem to that, the owner should really be interested in investing in and in developing the carrier which has not been the case of recent. And it’s no secret that our past owners were not only not interested in developing the company, but were also not really someone we could work with in total confidence, which should be the absolute minimum with any shareholder.
Where do you see XL’s long-haul strategy in two to three years time?Assuming you find a suitable, strategic owner, where will your focus be?
I think the model we have developed, which has shifted away from the full-charter business to a balance between tour operators and direct sales, is something which will be sustainable in the long run.
We are only interested in passengers who are price-driven, i.e. mostly people who pay for their tickets with their own money. Despite the economic crisis in Europe, and we are still going through a very tough crisis in France which affects demand because people’s priority is not their holidays or leisure travel, demand will generally increase, not only from Europe (and especially from France) to leisure destinations but also from emerging countries to Europe. So leisure travel will continue to grow.
Offering the best fares on the leisure market by using modern, high-tech aircraft with high density seating to be able to guarantee the best possible cost and therefore lower the price of tickets, is a model that has a future.
But I don’t have a crystal ball; I cannot predict the future and I do not have these skills. But by reading some industry newsletters and magazines I see some people think they can. I just laugh when I read statements from five years ago when those same people were telling us what 2015 would be like and then you realize we are in 2015 and, comparing it to where we are today, you realize it’s all a joke. We prefer not to pretend to be so smart as to predict what the future will bring as even the smartest people make mistakes when doing so.
Overall, I do not know if we will grow as part of a larger industry group or if we will be developing alongside a bigger, established airline. I also do not know exactly what size and network we will be focusing on, but I do of course have some ideas…
One thing is certain though. We know that even without XL Airways, the leisure-driven long-haul market will continue grow. So for us the question is simply where we do we have to be to be a part of it? There is no debate about growth; it will happen in this segment (Long Haul Leisure), no matter if it is denominated purely by tourists or by visiting friends and relatives. Those two segments – where people pay for their tickets out of their own pocket – will continue to be our target market.
Thank you very much