UPDATE 1-KLM/Air France deal hits last minute snag
Tue September 30, 2003 01:50 AM ET
(Adds Air France comments, details and background)
By Christopher Borowski and Noah Barkin
AMSTERDAM/PARIS, Sept 30 (Reuters) - An expected deal between Air France AIRF.PA and KLM KLM.AS to create Europe's largest airline appeared to have hit a last-minute snag on Tuesday, with the Dutch carrier saying it still had not decided on a tie-up which the French carrier approved Monday night.
"There is no deal yet. We are still talking... There are no indications how long it will take," KLM spokesman Bart Koster told Reuters. He declined to say what was holding up the approval by KLM's board.
Air France declined to comment. It had planned to issue a statement at 7.00 a.m. (0500 GMT) after approving a letter of intent to team up with KLM at its Monday meeting, but said it was unclear whether it would do so.
If completed, the KLM/Air France combination would take over from British Airways BAY.L as Europe's largest airline in terms of traffic and the world's third-largest behind American Airlines AMR.N and Delta DAL.N .
It may also pave the wave for further consolidation in the overcrowded sector.
KLM, one of the world's oldest airlines, has made several attempts to hook up with a European partner in the last decade, including two unsuccessful merger attempts with BA.
The French carrier's union officials said that under the plan, Air France and KLM would create a common holding company that would be supervised by an evenly split committee of eight members, with a tie-breaking vote going to Air France's chairman.
Yvon Touil, a representative of the CGT union on Air France's board, said that shareholders would receive a stake in the holding company that would reflect their respective valuations, which suggests an effective takeover of KLM by its larger rival.
Combined, the two airlines have a market capitalisation of 3.6 billion euros ($4.1 billion), with KLM accounting for 16 percent of the total.
They would retain their separate identities, a prerequisite for preserving their international landing rights, and the Dutch government is expected to keep its golden share in KLM for the time being.