Air France KLM to slash prices

Air France KLM said on Wednesday it would slash KLM ticket prices to all 66 European destinations from Amsterdam by around 40 percent on January 1 in an attempt to compete more effectively with low-cost carriers. "It's the biggest price cut in the history of KLM ... The new tariffs, which will be valid for the entire year, are similar to (big discount) action tariffs," KLM said.
KLM, which was taken over by Air France earlier this year, said quality and service will remain unchanged, although the airline will introduce some new costs. Unlike budget carriers, KLM still provides some refreshments without charge.
"By cutting prices, KLM expects to carry more passengers and generate substantially more revenues in European passenger transport," the airline said in a statement.
Analysts said KLM was responding to severe competition in Europe from low-cost carriers like Easyjet and Ryanair, pointing out that prices were not cut on intercontinental flights where it was better able to fill seats.
"The competition in Europe is killing," said analyst Peter Koster at FBS Bankiers.
In Europe, KLM's passenger load factor in the 2003/2004 financial year was 75 percent - meaning that on average one in four seats was empty - compared with a company average of 80.1 percent.
KLM also said it will make pricing more transparent, and cut costs by mainly issuing electronic tickets.
The lowest tariff, in the Take Off Fare class, to a popular destination such as Heathrow will drop to 69 euros ($94) from 109 euros, before airport taxes and surcharges. The price for a return ticket to Nice will be cut to 99 euros from 167 euros.
Hundreds of seats will be available at the lowest prices every day, KLM said, addressing concerns from the Dutch consumer union, which said earlier this week that advertised low prices in the wider travel industry were rarely available to consumers. The airline will introduce three other tariff classes, mainly aimed at business travellers, which provide more flexibility to change flights.