EC gives green light to Air France-KLM merger

12 February 2004

AMSTERDAM — The European Commission has given KLM and Air France the green light to merge and the US anti-trust authorities have also reportedly confirmed approval of the creation of Europe’s largest airline.

EU Competition Commissioner Mario Monti approved the merger on Wednesday on the condition that the new airline relinquishes 94 take-off and landing slots per day to their rivals. Both carriers accepted the demand.

Air France chief Jean-Cyril Spinetta said the planned share swap deal between the two airlines will take place in March and the takeover will be finalised in April or May.

The new company will be called Air France-KLM Holding and the Dutch flag carrier will hold a 19 percent stake. Air France will hold 37 percent and the French government will maintain 44 percent.

The Air France takeover of KLM will create the world’s largest airline in terms of sales and it could thus push smaller companies out of the market. The EC’s demand that the new airline relinquishes certain landing slots is thus designed to prevent its market dominance.

In relinquishing the slots, 31 new flights per day will be created for KLM and Air France competitors, public news service NOS reported.

The airlines were forced to give up flights between Amsterdam and destinations in France and Italy. They will also be forced to offer fewer flights from Schiphol Airport in Amsterdam to New York and Atlanta. Restrictions also apply for flights between Paris-Detroit and Paris-Lagos.

Air France and KLM had few overlapping routes. KLM is especially strong in Northern Europe and Asia, while Air France operates largely in Southern Europe and Africa.

“From a consumer point of view, the combination will allow KLM customers to have access to more than 90 new destinations while Air France customers will be offered 40 new routes,” the EC said.

“The combination of the two airlines is also expected to bring benefits to consumers and the economy as a whole from costs savings as well as from service improvements resulting from combined networks.”

Despite being forced to yield landing rights, KLM said it does not intend to start offering fewer flights and that EC restrictions will not mean the number of its destinations and the frequency of its flights will suffer.

A take-off or landing right at Schiphol can be used for various destinations and if a competitor demands a right on a certain route, KLM will be able to continue flying to the same destination using another landing right.

The EC statement also indicates that both the Dutch and French governments have agreed to give rival airlines a fair chance on landing rights between Amsterdam and Paris on the one side and destinations in the US and other countries outside of the European Union on the other. The EC-imposed restrictions apply for an unrestricted time period.

Meanwhile, KLM chief Leo van Wijk also said US competition authorities are also prepared to approve the merger. This was confirmed by CNN on Thursday. Approval from Washington is necessary for the deal to go ahead and the official decision from US authorities is expected later this month.

The final hurdle for the deal will then be approval from company shareholders.

Subject: Dutch news