Air France-KLM is banking on high-spending American tourists to fuel its recovery after a difficult year, according to CEO Ben Smith. The airline has seen “amazing” demand for premium travel, particularly from leisure travelers booking business and first-class seats. In response, Air France has shifted its business model to focus on the luxury market.
“It’s unbelievable what Americans are paying to come over here,” Smith told the Financial Times, citing strong demand during events like Paris Fashion Week. A first-class return ticket between New York and Paris in April is priced at around $24,000, and the airline is launching an updated first-class cabin this month.
Despite this focus on high-end travel, Air France-KLM reported a sharp decline in full-year net profit, which halved to €489 million. Smith attributed this to external challenges, including:
- The Paris Olympics, which have deterred some travelers from visiting the city.
- Higher operational costs, particularly at Dutch carrier KLM.
However, revenue rose 5% to €31.5 billion, and Smith remains optimistic that premium leisure travel will drive higher yields. Air France has already seen a 25% increase in ticket prices for U.S. customers since 2018.
Smith warned that European carriers face an uneven playing field when competing with Turkish Airlines and Gulf carriers such as Emirates, Etihad, and Qatar Airways. These airlines are not subject to EU environmental taxes, including biofuel mandates, making it difficult for Air France to expand into markets where they dominate.
“For us to imagine opening new routes in areas where the Gulf carriers are dominant, it’s not realistic, unless there are enough people who want to fly nonstop,” he said.
Meanwhile, Air France-KLM is eyeing a potential acquisition of Portuguese airline TAP, which is expected to be privatized later this year. However, Smith made it clear that the airline would only be interested if it could secure a majority stake. Competitors including British Airways owner IAG and Lufthansa have also expressed interest in TAP, which has a strong network of flights to South America.
