Alitalia Looking To New Alliance & Air France/KLM Agree Landmark Merger


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Alitalia Looking To New Alliance

Sep 30, 2003

Italy's state-controlled airline Alitalia has confirmed that it is looking to join the newly announced Air France-KLM partnership.

The carrier says it is preparing for talks with the combined company which is set to become Europe's largest airline.

However, the Italian government must first dilute its 62 percent stake in Alitalia before negotiations can start and the country's parliament is expected to rush through privatization legislation to accelerate the process.

Alitalia said it had signed agreements with both Air France and KLM setting out a timetable for joining the new alliance. The three airlines will aim to create a joint cargo business as well as examining integration of their passenger services.


Air France/KLM Agree Landmark Merger

Sep 30, 2003

Air France and Dutch carrier KLM announced today that they have reached a merger agreement which will create Europe's largest airline.

In a joint statement, the two companies also said that Italian flag carrier Alitalia is to start negotiations to join the new group.

The complex deal is, in effect, a takeover by Air France of its smaller Dutch rival for which the French carrier will pay EUR784 million (USD$900 million). The two sides said that they hoped to sign a final agreement within the next few weeks.

The new company will become the world's third largest airline, after US carriers American Airlines and Delta Air Lines. It will also expand the SkyTeam airline alliance to make it the world's second largest.

More significantly, the merger points the way to consolidation of the European airline industry, thought by many aviation experts to be inevitable after the financial problems encountered by carriers since 2001.

That was echoed in today's statement by the chief executives of both companies. Air France's Jean Cyril Spinetta said: "We have always been convinced of the necessity of consolidation in the airline industry. Today, we announce a combination with KLM that will create the first European airline group, which is a milestone in our industry."

For KLM, who have been seeking a partner for a number of years, President and CEO Leo Van Wijk said: "KLM has been pointing out the need for consolidation in light of the challenges facing our industry and we have not made it a secret we were looking for a strong European partner. Through this innovative partnership with Air France and our subsequent expected participation in the SkyTeam alliance, we are confident that we have secured a sustainable future for our company."

Under the terms of the deal the French government will dilute its 54 percent holding in Air France to 44 percent of the combined company.

The combined annual revenues of Air France and KLM are EUR19.2 billion in aggregate. They jointly serve 226 destinations worldwide, operate a fleet of around 540 aircraft and employ approximately 106,000 people.
Who could imagine that a couple of years ago ?! Now they're forming the World's third largest airline. It seems like this "merger business" is becoming to be the trend of the moment. Varig ( Latin America's largest carrier) and TAM, both from Brazil are also about to merge. Then GOL, Vasp and what's left of TransBrasil are thinking of doing the same. I just hope no layoffs will occur as a result of all this, but I really think that will be virtually impossible.
Peace !
Well, the KLM/Air France merger won't result in any layoffs because both airlines will continue to operate independently and they'll retain their respective hubs.

And you see how the DOJ here in the US reacts to mergers. Hell, they didn't let two airlines that ended up filing for bankruptcy merge, even with a spin off of multiple assets at DCA. So if that one didn't fly (no pun intended), what will?