Connections, Not Costs, the Driver behind ‘Landmark’ Interline Agreement

Jun 07, 10 | 1:56 am

By Yeoh Siew Hoon

It's being called a "landmark" interline agreement - the one signed between Air France KLM and the Jetstar Group yesterday in Singapore.

Landmark because it's the first for the European traditional full service carrier to sign such an agreement with Asia Pacific's fastest growing low cost airline group and for Jetstar, it's the first signed with a full service carrier outside its parent company Qantas.

The agreement, which brings together a traditional full service carrier with a low cost airline on a major scale, will feed the entire Air France KLM network from its Paris and Amsterdam hubs into Jetstar's hub in Singapore, which covers up to 60 routes in the region.

Acknowledging that "the walls are crumbling", Marnix Fruitema, senior vice president, Asia Pacific, Air France KLM (left), said, "We have a joint vision to connect two worlds - the world of Air France KLM, the largest European airline group in the world, with the largest low cost operator in Asia Pacific, Jetstar."

That such an agreement can be signed between a full service carrier and a low cost airline group is driven by changes in customer behaviour driven by both technology and a more open airline environment, said Chong Phit Lian, CEO of Jetstar Asia (centre).

"Customers now have a lot of choices and they can make their bookings online. Tying up with a reputable partner in Europe makes sense for us and benefits our customers."

Both airlines acknowledge that this agreement was more about choice, convenience and connections for their customers than it is about costs. "Increasingly, there is a growing need by passengers to connect," said Fruitema.

For Jetstar, it represents a means to plug into the Air France KLM's corporate travel customer base. "Increasingly we are seeing more corporate customers on our flights," said Chong.

Fruitema sees an upside too in the leisure travel segment with Jetstar's customers wanting to connect to Europe and the airline would work closely with the travel trade to maximize this interline agreement.

However the agreement, at this stage, does not cover Air France KLM's frequent flyer programme.

Under the agreement, a customer booking on the Air France KLM website will be able to book flights going on to Cairns or any other destination in the Jetstar network. The same however will not be true on the Jetstar website at the moment - again, this is something both airlines said could be added further into the partnership.

In Singapore, close to 90% of Jetstar's bookings come direct through its website, said head of commercial Leslie Ng. According to Paul Rombeek (right), general manager, Singapore, Indonesia, Australia and New Zealand, Air France KLM gets about 25% of its bookings in Singapore through its website, "a high figure for a traditional carrier".

The possibility of this agreement was first raised in Melbourne almost a year ago during a meeting between Air France KLM and Qantas. "We talked about an interline agreement and then somehow someone said, what about Jetstar, and our discussions grew from that. It was a organic process," said Fruitema.

The European airline works with several partners in Asia Pacific, including Korean Air, China Eastern and soon Vietnam Airlines which will be joining the SkyTeam next week. "Asia Pacific is too diverse, too large to have just one partner. Our agreement with Jetstar is to drive business out of Singapore, South-east Asia and Australia and New Zealand, where we see tremendous growth potential," said Fruitema.

It also operates code-share flights with Qantas to five destinations in Australia and transfers 100 passengers each way, each day on these flights, said Rombeek.

Fruitema said he was optimistic about the outlook from Asia this year. Last year, the Asia Pacific market held up for Air France KLM in terms of volume but not yields. However year to date, the region was making a strong recovery and "I am very optimistic about the year to come".

Meanwhile, as part of its plans to launch low cost longhaul flights, Jetstar will start Osaka services on July 5 and by year end, will fly to Europe.

* This article is dedicated to The Customer who will be at the Centre of Conversations at WIT Conference 2010. To see what's in store, watch this video.

Reprinted with permission, Yeoh Siew Hoon and The Transit Cafe (www.thetransitcafe.com) 

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