How Air France’s First Non-French CEO Waged Peace to Fix Its Dual Hubs

Where it started: chronic friction, labor deadlock, and structural fragmentation

For more than a decade following the 2004 merger of Air France and KLM, the French arm of the group operated as a case study in structural inefficiency. While KLM generally earned stronger margins out of Amsterdam Schiphol, Air France struggled to earn a solid profit in Paris. The airline was trapped in a self-defeating cycle: aggressive union resistance, recurring strikes, dual-hub operational duplication, and high fixed costs rooted in national labor regulations and heavy French payroll taxes.

The structural vulnerability peaked in May 2018. Following months of rolling strikes organized by pilot, cabin crew and ground staff unions—action that cost the airline €335 million (approx. $360 million) in early 2018 alone—Chief Executive Jean-Marc Janaillac put his strategic turnaround plan to a company-wide employee vote. When 55% of workers rejected the proposal, Janaillac resigned immediately, leaving Air France leaderless, financially strained, and facing widespread industry skepticism about whether any executive could manage French aviation unions.

Beyond labor unrest, Air France operated under severe structural constraints. Its hub operations were divided between Paris-Charles de Gaulle (CDG) and Paris-Orly (ORY). Orly handled point-to-point French domestic routes and French overseas territory services, while CDG managed long-haul international traffic and European feeder flights. This dual-hub setup created operational redundancy, diluted fleet utilization, and exposed domestic routes to fierce competition from France’s high-speed TGV rail network. Meanwhile, European low-cost carriers like Ryanair and easyJet chipped away at short-haul market share, while Gulf carriers systematically eroded Air France’s long-haul secondary connecting flows between Europe, Asia, and the Middle East.

The strategic bet: wage peace, single-hub centralization, and asset rationalization

In September 2018, the Air France-KLM board made a unprecedented move by appointing Benjamin Smith—the former Chief Operating Officer of Air Canada—as the group’s first non-French Chief Executive Officer. Smith immediately placed a multi-tiered strategic bet designed to fix Air France’s underlying cost structure without triggering a fatal union showdown.

First, Smith prioritized social dialogue over public confrontation. Early in his tenure, he negotiated wage agreements with major unions. Management also gained room to streamline short-haul operations and dismantle Joon—a confusingly positioned sub-brand created in 2017 to target millennial travelers. Joon’s aircraft and crew were integrated back into mainline Air France, eliminating administrative overhead and operational friction.

Second, management made the strategic decision to consolidate mainline Air France entirely at Paris-Charles de Gaulle. Under a multi-year restructuring program culminating in March 2026, Air France systematically withdrew mainline domestic point-to-point routes from Paris-Orly (with the exception of Corsica services), transferring its valuable Orly slot portfolio to low-cost subsidiary Transavia France. This division of labor allowed Transavia to fight budget carriers using a low-cost structure, while mainline Air France concentrated every short-haul flight at CDG to feed long-haul widebody aircraft.

Third, Air France executed a widebody fleet overhaul. Rather than attempting to fill high-capacity, four-engine aircraft on volatile routes, management elected to simplify the long-haul fleet around fuel-efficient, twin-engine widebodies. When the COVID-19 pandemic struck in early 2020, Air France permanently retired its entire fleet of 10 Airbus A380s and remaining A340s years ahead of schedule. Though the decision forced significant balance sheet write-downs, it permanently removed millions in fixed maintenance overhead and laid the groundwork for a standardized long-haul network.

Hub & fleet: how the strategy is actually executed

(a) The Hub: Paris-Charles de Gaulle (CDG)

Paris-Charles de Gaulle serves as the foundation of Air France’s network strategy. Unlike London Heathrow, which operates at over 98% runway capacity with only two runways, CDG features four parallel runways operating in two independent pairs. This physical layout enables Air France to structure its timetable into several synchronized arrival and departure waves (banks) each day, maximizing connecting combinations between European regional flights and long-haul international departures.

However, operating at CDG imposes strict constraints. The airport also has night-time noise restrictions. Additionally, French air transport taxes, environmental levies, and Groupe ADP airport charges rank among the highest in Europe. To make this high-cost hub viable, Air France cannot rely on low-yield transit traffic. CDG must balance connecting passengers with high-yielding local origin-and-destination (O&D) traffic generated by Paris—the world’s top international tourist destination and a major European corporate hub.

(b) The Aircraft: Matching Gauge to Hub Structure

Air France’s fleet decisions directly mirror its hub design, replacing a fragmented mix of older jets with two core modern aircraft families:

• Short/Medium-Haul (Airbus A220-300): Air France selected the A220-300 to replace its aging Airbus A318s, A319s, and older A320s. Configured with 148 seats in a 3-2 cabin layout, the A220 delivers a 25% reduction in fuel burn per seat and a 50% smaller noise footprint compared to previous-generation narrowbodies. Crucially, the A220’s low trip cost makes thinner European regional feeder routes commercially viable, allowing Air France to channel passengers from secondary European cities into the CDG hub without oversupplying seat capacity.
• Long-Haul (Airbus A350-900 & Boeing 777-300ER): On long-haul routes, Air France relies on the Airbus A350-900 and Boeing 777-300ER. Configured with 324 seats (34 Business, 24 Premium Economy, 266 Economy) or 292 seats with expanded premium cabins, the A350-900 provides exceptional fuel efficiency and range (up to 9,700 nautical miles). It handles long, thin routes to South America, Asia, and Africa, while high-density Boeing 777-300ERs serve high-volume trunk routes to North America and the French Caribbean.

(c) The Order Book as Evidence of Strategy

Air France-KLM’s order book demonstrates clear capital allocation priorities. In September 2023, the group placed a landmark order for 50 Airbus A350 family aircraft with purchase rights for 40 more. Combined with earlier individual airline orders, Air France-KLM established itself as the world’s largest operator of the A350 family.

However, the shape of this order book underwent a revealing adjustment in August 2025. Airbus backlog figures revealed that Air France-KLM converted eight of its 11 ordered A350-1000s into the smaller A350-900 model. This shift illustrates management’s disciplined approach to gauge management. While the larger A350-1000 offers roughly 40% more space for premium seats, the A350-900 provides lower overall trip costs, better hot-and-high airfield performance, and longer range. By opting for the -900, Air France avoids taking on excess seat capacity that would require discounting fares during off-peak seasons, prioritizing unit revenues over gross seat counts.

Air France operates a growing fleet of Airbus A350-900s, with more widebodies on order across the group. On the narrowbody side, it is taking delivery of its 60 firm-ordered Airbus A220-300s. The gap between aircraft on paper and aircraft flying today shows an airline midway through a complete widebody fleet replacement, with incoming A350s replacing older A330s and Boeing 777-200ERs.

Competitive reality: stacking up against IAG, Lufthansa, and Gulf rivals

Air France’s turnaround must be evaluated against its major European flag-carrier peers: International Airlines Group (IAG) and Lufthansa Group. In fiscal year 2025, Air France-KLM delivered a record group operating profit exceeding €2.0 billion (approx. $2.36 billion) on revenues of €33.0 billion (approx. $38.9 billion), representing an operating margin of 6.1% and carrying 102.8 million passengers.

While a 6.1% operating margin marks a major historical achievement for Air France-KLM, it trails IAG, whose 2025 operating margin was about 15% (15.1%). IAG benefits from British Airways’ dominant position at London Heathrow—an airport constrained by slot caps that allow BA to extract extreme pricing power on premium North Atlantic routes. By contrast, CDG faces higher airport capacity and stronger low-cost pressure. Lufthansa Group, meanwhile, has faced high German infrastructure costs, delayed aircraft deliveries and labor disputes.

Against Middle Eastern mega-carriers (Emirates, Qatar Airways, Etihad) and Turkish Airlines, Air France defends its long-haul market share by leveraging protected traffic rights and cultural ties in West and Central Africa (such as Abidjan, Dakar, Yaoundé, and Brazzaville). On these routes, point-of-sale pricing remains exceptionally high, and direct flights from Paris CDG offer a distinct travel time advantage over multi-hour detours through Gulf hubs.

The demand side: reach, premium volume, and product

Supply-side efficiency (fleet standardization and slot management) only works if passengers pay for the product. Air France’s recovery strategy relies heavily on up-gauging its premium passenger revenue.

Following a collapse in passenger traffic during the 2020 pandemic Air France-KLM steadily rebuilt volume afterwards. Crucially, the financial quality of this passenger base improved. By late 2025, premium cabins (La Première, Business, and Premium Economy) generated a growing share of network revenue.

Two specific, named routes highlight how Air France’s network structure functions in practice:

• Paris CDG to Papeete (PPT) via Los Angeles (LAX) — Flights via Los Angeles: This is a long transpacific route. Air France uses fifth-freedom traffic rights to carry passengers between Los Angeles and Tahiti in addition to direct travelers from Paris. The route leverages sovereign connections to French Polynesia while capturing lucrative West Coast U.S. premium leisure travel.
• Paris CDG to Cape Town (CPT) — Seasonal service: Air France has flown to Cape Town as a seasonal service, connecting South African point-of-sale business and tourism traffic directly into the morning wave at CDG.

On the product side, Air France invested heavily to differentiate its premium offering from European competitors. The carrier re-designed its ultra-exclusive La Première first-class cabin on select Boeing 777-300ERs and incoming A350s. Featuring private suites with floor-to-ceiling curtains, full-flat beds, Michelin-starred cuisine, and private Porsche chauffeur transfers at CDG, La Première functions as an effective halo product. As a halo product, it lifts the brand's premium reputation across the cabins. Furthermore, the airline has announced a rollout of free high-speed Starlink Wi-Fi across its fleet.

What the evidence shows: connective logic and unit economics

The financial and operational data reveals a clear analytical thesis: Air France’s multi-year recovery is not an accident of post-pandemic travel demand, but the result of matching specific market constraints with asset selection.

When management replaced aging A318/A319 narrowbodies with 148-seat A220-300s, it lowered cost per available seat kilometer (CASK) on European feeder routes while offering a product that feeds premium passengers into CDG. By exiting domestic Orly flights and handing those slots to Transavia France, Air France protected group market share against easyJet and Vueling without burdening mainline Air France with low-yield domestic traffic.

The decision to convert eight A350-1000 orders into smaller A350-900s demonstrates disciplined capital allocation. Rather than taking on heavy widebody capacity that could depress yields during demand troughs, Air France prioritized flexibility and lower trip costs. Having repaid much of its COVID state aid, Air France-KLM was free to pursue acquisitions again. This paved the way for the group’s acquisition of a 19.9% stake in SAS Scandinavian Airlines in 2024, set up for a path toward majority control in 2026.

Where this leaves Air France: the road ahead and open vulnerabilities

Air France has successfully engineered a structural turnaround, shifting from a loss-making, strike-prone carrier into a profitable network airline centered on a single Paris hub. Its long-haul fleet is modernizing rapidly around the A350-900, labor relations remain stable under Ben Smith’s leadership, and premium cabin yields continue to outperform historical benchmarks.

However, serious open risks remain. The carrier faces escalating French environmental taxes, rising corporate taxation introduced by the French government, and expanding EU Emissions Trading System (ETS) carbon costs that disproportionately affect European network hubs compared to non-EU rivals. Furthermore, operational challenges at sister airline KLM—stemming from proposed flight caps at Amsterdam Schiphol and Dutch supply chain bottlenecks—place an increasing operational burden on Air France to maintain group earnings.

To lift its operating margin further, Air France-KLM must complete its widebody fleet renewal, deepen ties with SAS (already in SkyTeam since 2024) without diluting yields, and successfully defend its high-yield African and transatlantic routes against expanding foreign competition.