ASL Airlines France is trying to grab a share of the market for direct flights between Tel Aviv and Paris by offering an especially low price: $275 for a round-trip flight. ASL will begin operating two weekly flights to Israel on July 3, competing with a range of rivals on direct flights to Paris, including El Al Israel Airlines Ltd. (TASE: ELAL), Air France, Transavia Airlines, XL, Arkia Airlines, and easyJet.
Passenger traffic on the Tel Aviv-Paris route totaled over 855,000 passengers in 2017, 4% more than in the preceding year. Paris is the second most popular destination for Israelis after Istanbul, from where over 85% of passengers continue to other destinations.
"This is a high-volume route with lively traffic. Despite the large number of airlines, there is still a shortage of seats," Jean-Francois Dominiak, who has been CEO of ASL since 2000, told "Globes." "Competition is a spur, not something that deters us. It's clear to us that we'll be able to take market share away from El Al, whose prices are double ours."
ASL is part of the ASL group, founded in Ireland, which includes a number of airlines from countries in Europe (Belgium, Spain, Ireland, and others). The group finished 2017 with a €1 billion turnover. The carrier's air fleet contains 140 airplanes and 2,500 staff from 52 countries. ASL France has a fleet of 15 airplanes and a turnover of €150 million. The company is in the midst of changing and adapting to a dynamic market. "The low cost airlines are growing in France, too, as they are all over the world," Dominiak says. The adaptation includes extending its portfolio of charter flights to regular flights like the one on the route to Israel. The company began mostly as a cargo airline with an emphasis on passenger flights. Its business is now equally divided between cargo and passengers. ASL has also developed a plane that can be converted from a cargo plane to a passenger plane in 20 minutes.
"El Al faces growing competition. Our strong point is service, and that's how we want passengers to distinguish us. It sounds like a slogan, but it's something that we apply in practice," Dominiak declares. The company's planes are narrow-bodied with 150 seats, including 14 in business class. "The small airliner enables us to achieve full occupancy, and reflects a streamlining model that is expressed in the ticket price," he explains.
"Globes": Why did you not develop the cargo business, which has grown together with online shopping, and accounts for a large proportion of the airlines' business?
Dominiak: "We work in cooperation with the French post office. The volume of ordinary postal deliveries like letters is dropping. The e-commerce sector is growing, but the main players in it are private delivery companies like FedEx and DHL. In addition, in Europe, most deliveries are by truck, not airlines, because of the cost. A Frenchman or Frenchwoman who orders a package from Poland prefers paying less for delivery and getting his or her package in two days via truck. Our fellow-subsidiaries in the group are growing as a result of cargo business, thanks to cooperation with the delivery companies. We've chosen to focus on passengers who are traveling now, with an emphasis on Europe and the Middle East. We have been working for years with Isrotel and Israelis in packages including flights to Ovda Airport and Tel Aviv. We spotted the potential of the market in Israel, and decided to operate independent flights, at this stage to Paris. In the next stage, we will consider flights from other destinations in France, including Toulouse, Nice, Lyon, and others.
"We aren't trying to grow by opening routes to new destinations; we're trying to strengthen the existing routes in which we see value. We realized that there is traffic from Paris to North Africa, mainly Morocco and Algeria, and we decided to enter these destinations with a focus on passengers visiting friends and relatives. This is also the potential of the route to Tel Aviv - both Israelis traveling to France and French people traveling to Israel." French and Israeli passengers pay the same prices for flights.
"95% of our flights take off on time," Dominiak adds. "This a habit we have adopted from our cooperation with the French post office, and it's something that passengers appreciate. The price is important to passengers, but also the service, and this is our trump card."
At this stage, flights on the Tel Aviv-Paris route are reserved only for the summer of 2018 (July-August). Dominiak notes, however, that flights will probably now be extended to the rest of the year. "We're waiting to see how the market responds to us. As of now, it looks promising, and the pace of orders is greater than the target we set. In the business model, we know that it's possible to make money only starting in the third year of operating the route, so the target at this stage is to break even. If we don't manage to reach this stage, we're in trouble."
Prices for ASL's flights begin at $275 round trip without luggage, $300 including luggage, and $620 for business class. The flights include a kosher meal. For the sake of comparison, flights by competing airlines scheduled for July 10 cost $380-390 on XL and Transavia and $530 on El Al and Air France (according to the Eshet Tours website, as of today). A flight with easyJet on this date costs €285. ASL's weak point, however, is its takeoff slots in Israel: 8:30 PM, landing just after midnight in Paris.
Dominiak is aware that this problem could drive away passengers, who will have to take into account another night in a hotel, for example. "The slots reflect the competition. I know that the competitors have better slots, and so our price is aggressive. The consolation is that on the way back from Paris, flights take off at 2:00 PM and land in Israel at 7:30 PM. This is a convenient time for businesspeople and people traveling for a few weeks to visit family, for whom the arrival time is in any case not critical. easyJet flights from Israel also land in Paris around midnight, and its airplanes are full. People are willing to compromise on the landing time if they pay a lot less," he says. In the same breath, Dominiak emphasizes, "Maybe we'll try to exchange the flight days and maybe find better slots in the future. Even if the hours aren't the most convenient, with us, you get service that you're not used to. I'm not competing with low cost, because my product is better. On the other hand, the two airlines that operate regular flights from here can't compete with my price. I'm actually offering something that doesn't exist on the route to Paris: a regular flight at the price of the low-cost flight."
Published by Globes [online], Israel business news - www.globes-online.com - on April 10, 2018
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