Patrick Alexandre, executive vice-president of Air France-KLM Group, sat down with Ahram Online on a recent visit to Cairo to discuss the company's service to Cairo, economics and challenges to the commercial aviation sector.
Al-Ahram: For the launch of your new Boeing 787, the Dreamliner, you decided that its first commerci al route would be between Amsterdam and Cairo. A decision that surprised some ...
Patrick Alexandre: I think there are a few reasons. First of all because we have been flying to Egypt for years, since 1949, and KLM even before. So there is a long relationship, presence, of Air France in Egypt.
Of course, there are very good relations between France and Egypt at the moment on many levels. That was the main reason. We had to choose among different destinations, but our final decision was Egypt. So it was a mix of reasons: a technical one but also a political one.
You have reduced your flights to Cairo in recent years; KLM has even canceled Cairo as a destination. Exchange rate problems have been mentioned to explain this situation. What do you think?
As a group we have to adapt to all situations. As the situation on this route became economically tense, we had to adapt to a very efficient operation in order not to lose, because the secret of a long-lasting service is definitely to be economically positive.
I think this route is important for us even now because Egypt is recovering economically, and tourism is on its way to recovering too.
So I think it is important to say that we strongly support Egypt, but to mention too that some things have been difficult. The exchange rate problems, the transfer of money issues, for example. These have been strong, serious problems. Now, we fully understand the situation and I must say we see an improvement.
Indeed, we cannot fly with nonsense economics. We had a very positive discussion with the government trying to solve this issue. They have explained how they are trying to recover, to create a better, more efficient foreign currency regime.
Apart from the problem of exchange rates and the transfer of money, are there other obstacles to your work in Egypt?
No I do not think there are other important obstacles.
I think the economic situation is challenging for all of us, all the airlines. But there is a lot of potential in the Egyptian market: 92 million people are living in Egypt and a lot of them travel, so there is also a lot of potential for us in the near future.
In that respect if we look at the past, we were flying 20 times per week, [through] Air France and KLM. Now we have 6, but don't forget that quite a lot of airlines suspended their operations to Egypt.
We stayed during tough times and when there will be a full recovery we will be there.
Do you feel that there is the beginning of a recovery in the tourism sector?
It is picking up slowly in Egypt. France is suffering in tourism too and because of the Paris attacks last year, and recovery usually takes a lot of time. The keyword for that is trust: by flying the 787 brand new aircraft to Egypt, we are sending signals of the confidence we have in Egypt.
But sometimes people need time to get back to confidence.
As it has had an impact on Egypt, France as a destination suffered a lot from terrorism. I'm referring to people travelling to France from China, or Japan as an example. So yes, sure, now it is recovering but once again, people need time to get back to confidence.
Oil prices have fallen in recent years, how has this affected your operations?
As an industry we are facing a kind of toxic cocktail of overcapacity, terrorism, and worldwide economic difficulties. Gulf carriers (not only them, but for example), are flying and flying and flying, more than the actual demand. This clearly creates overcapacity.
Terrorism is another problem, like what happened in Paris, what's happening to Egypt and what's happening in other parts of the world. It creates what we call the fear effect. If you add some economical difficulties which [we saw] last year in China, Brazil, and also in Europe... this cocktail has had a very negative effect on revenues.
The decrease of fuel cost has alleviated some effects this toxic cocktail. But in terms of revenues, the gains on the cost side have been redistributed to passengers to [boost traffic]. The average price for air transport has decreased.
On the other hand, the oil industry is travelling much, much less than before. In our business, oil industry is a very important segment of customers. I can tell there is significant effect on the number of passengers we fly because of this industry, even from Egypt.
In Egypt, we have quite a large number of key oil operators and for the time being they are travelling less.