Air France-KLM

17 Pages 4298 Words

BACKGROUND

On Wednesday, February 11th 2004 the merger that would create the world's third-largest airline was approved by the European Commission and the U.S. Department of Justice. Air France and the Netherlands-based KLM plan to operate two carriers under a single holding. The two airlines have agreed to form a joint holding company under which the Air France and KLM brands would co-exist for three years. Under the agreement KLM will retain its foreign landing rights even though it will join a French-led holding company.
The company, Air France-KLM, will own 100 percent of both airlines but KLM will remain Dutch, with 51 percent of its voting rights held by the state and two foundations.
Air France's takeover of KLM will bring the Dutch carrier into the SkyTeam alliance, currently the world's third largest. The product of the Dutch KLM and Air France merger may get even bigger as Italian airline Alitalia seeks Commission approval to join. But even if Alitalia does not come on board, the initial merger will create a competitor for European airline leviathans British Airways and Lufthansa. Additionally, KLM has alliances with Northwest and Continental airlines, while Air France has one with Delta.

The partners
KLM is a Dutch-based full-service carrier operating worldwide. The KLM group has four main activities: passenger air transport, cargo transport, maintenance services and the operation of charter and low-cost/low-fare scheduled services by its subsidiary Transavia. KLM operates a hub and-spoke network with its principal hub at Schiphol airport. KLM has an alliance with Northwest Airlines covering principally operations on North Atlantic routes and related feeder routes. There is currently no majority shareholder in KLM, although the Dutch State currently holds 14% of the voting rights.

Air France is a French-based full-service air carrier with significant international operations. The Air France group has three main...