Air France-KLM

17 Pages 4298 Words

activities: passenger air transport, cargo transport and maintenance services. Air France operates a hub-and-spoke network with its principal hub for international operations at Paris Charles de Gaulle airport and its main domestic hub at Paris-Orly airport. It is also one of the founding members of the SkyTeam alliance, which members are, in addition to, Alitalia, Delta, CSA Czech Airlines, Korean Air and Aeromexico. Air France is currently controlled by the French State, which holds 54.4% of the voting rights.
Reason for acquisition
Deregulation has triggered a wave of co-operative arrangements or alliances between airlines. These are mainly designed to achieve fleet rationalisation, expansion and rationalisation of network structure, greater exploitation of cost-side economies of scale and reduction of costs through joint purchasing, joint marketing, etc. KLM and Air France expect the new entity, which will be the world’s largest airline group by turnover (19.2 billion euros) and a world leader in one of its core businesses (passengers), to have the potential to develop powerful synergies. The complementary nature of the two airlines, which will each retain their brands and unique values, will ensure that the new group is more attractive for passengers, as they will gain access to an enhanced offering, and will create substantial shareholder value.


Synergies expected to be established by the acquisition:
§ Preservation of own brand and identity while capitalizing on the strengths and complementarities of both airlines
§ Creation of greater opportunities for employees
§ Emerging as a strengthened airline group
§ Reinforced competitive position in all business sectors due to an optimized network
§ Potential for market valuation
§ Improved deployment of passenger and cargo activity
§ Expanded maintenance offering along with cost savings in supplies, sales distribution and Information Technology

EXECUTIVE SUM...