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This article originally was published on June 17, 2018, on

Last week saw one of the oddest airline-related news pieces in recent times. Many outlets, including Reuters, reported that AccorHotels was considering taking a stake in Air France, potentially as much as the entire 14.3% of the airline currently owned by the French government. The reported rationale for considering the investment is that AccorHotels finds itself struggling to compete with online travel agencies like Expedia. One reason for this struggle is Expedia’s ability to create travel packages. AccorHotels apparently reasons that if it owns part of Air France, the company will be able to create packages as well and, therefore, would be better able to compete with the online travel agencies.

The idea of a hotel company buying into an airline is unusual, to say the least. The market clearly was surprised by the idea as well, as AccorHotels’ shares dropped upon the news. Here are five reasons that AccorHotels should not invest in Air France:

  1. You don’t need to own an airline to create travel packages. When you look at the leading companies that create packages—the online travel agencies, tour operators, even cruise lines—none of them own part of an airline. There are several routes Accor could use to create packages that don’t tie up capital or impact the balance sheet. These include establishing a wholesale relationship with an airline or using one of the white-label travel booking solutions. 

  1. AccorHotels needs a much broader network than Air France’s to serve all of its properties. A quick look at the location map on Accor’s website shows that it has properties all around the world. However, Air France, like all airlines, is effectively limited to flights that touch its home country. This mismatch means that Air France is poorly suited to support many Accor properties. For example, Accor has four Fairmont properties in Vancouver with a total of 1,799 rooms. Air France currently flies one route to Vancouver (from Paris) four times a week with a 777-200 that carries a total of 309 passengers. Accor would be much better off supporting its Vancouver properties by packaging flights from a local carrier like Air Canada with its rooms. However, if Accor owns a piece of Air France, Accor becomes a much less suitable partner for Air Canada.

  2. AccorHotels would be tying its own reputation to Air France’s service. Hoteliers pride themselves on a culture of hospitality that has long since left most of the airline industry. While Air France has avoided the kind of headline-grabbing experiences that other airlines have suffered, it’s safe to say that the customer experience at Air France (or almost any airline for that matter) is a far cry from that of many of Accor’s brands. Accor should be wary of tying its reputation as a hotelier to a company where creating customer delight is difficult even under the best of conditions.

  3. It’s tough to make money in the airline business. There’s no doubt that the airline business is glamorous, probably more so than even top-end luxury hotels. Many in the industry were initially attracted by that glamour. The reality is that the airline business is tough. Competition is intense and many factors beyond an airline’s control affect profitability. There’s a reason why airlines often struggle to be consistently profitable. The track record of those investing in struggling airlines is, at best, mixed. Just ask James Hogan, who lost his job as CEO of Etihad after investing in Alitalia and Air Berlin.

  4. The paths to making Air France a reasonably profitable, sustainable business require concessions from French unions. Air France’s former CEO Jean-Marc Janaillac stepped down in May after unions voted down a pay package he proposed. Now, as The Local reports, even while the airline operates with temporary leadership, Air France’s unions are calling for more strikes in June. Air France’s financial results make clear that there’s little room to raise pay. Few would find investing in a company with this kind of labor situation appealing.

There are obvious reasons for AccorHotels not to invest in Air France, and few examples of investment success with airlines in Air France’s position. AccorHotel’s capital is best deployed elsewhere.


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Topics: hotels, Hospitality, Airlines, travel and tourism, Air France, AccorHotels