KLM - Air France (merged)

[gofer]

Air France and KLM to merge tomorrow according to the Swiss news 10 to 10 a few moments ago .....

Hope that there are not too many out on the street with 28% of the market between them....

Good luck to all :mad: :ok:

[touch&go]

Bit more about it on the BBC web site:

http://news.bbc.co.uk/1/hi/business/3148748.stm

[Jetlegs]

http://home.quicknet.nl/mw/prive/hwl/hap.jpg

[flyblue]

Air France board agrees to KLM exchange offer: union (29/09/2003)



PARIS (AFP) The Air France board of directors gave its approval to an exchange offer for shareholders of the Dutch airline KLM, with which it is close to a merger-takeover, a union member of the board told AFP.

"For the moment, the board has approved a letter of intent that will be released by the company," said Yvon Touil of the CGT union.

Asked whether the letter concerned an exchange offer, Touil replied "yes." He declined to give further details.

Air France President Jean-Cyril Spinetta has insisted any decision remain confidential until Tuesday morning.

Air France and KLM are said to be close to the launch of a merger-takeover that would create the biggest airline in the world in terms of sales, ahead of American Airlines.

Francois Cabrera, head of the French airline's chapter of the CFDT trade union, said earlier Monday that Air France would announce the exchange offer for KLM shareholders Tuesday, pending approval by the airline's board.

"Management told us we will only be authorized to give details of the offer, i.e. the rates of exchange, tomorrow, because the board meeting this evening must authorize the president to launch the operation," he told media following a works council meeting in Paris.

To provide fresh Air France shares, the company would carry out a capital increase of "around 15 percent", indicated Emmanuel Jahan of the CFE-CGC union.

CFDT delegate Philippe Decrulle told reporters the operation would extend until April to allow for scrutiny by the European Commission, which cried foul on September 17 when Paris tried to ram through a bail-out of the engineering giant Alstom.


Agence France-Presse

[A/P Disc]

Tomorrow 0700 CET it will be announced
that Air France takes over KLM

Source: Reuters,CNN

World's olderst airline (1917) will be disbanded
into a new french company based in Paris.
KLM will have 16% of the shares. The Dutch
will retain landing rights out of Amsterdam for
8 years. New company will be one of the
biggest in the world.


Rgds

[flyblue]

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.

[Otterman]

The deal is done, details will follow at a press conference at 10:00 CET.

Initial reports make is sound like job security is garuanteed for five years (for whatever that is worth). The brand name of KLM will remain for the foreseeable future.

As has been speculated for weeks now, a new holding company will formed which will contain Air France and KLM. The valuations are along the lines that have been mentioned before.

In two weeks time the deal will be signed pending input from all parties involved.

Regards, O.

[Pointer]

I have pitty on the former Air-Uk lot... first owned by the cheap dutch and now.... owned by bloody frogs :E

[A/P Disc]

I just watched the pressconference. Not good.
KLM will be around for about 3 years and then major
integration will take place.

Garantees by Air France are good for only 8 years!!! :uhoh:

KLM called itself the "junior partner" . They got that
part right!

KLM name may dissapear in the future.After 5 years
the Dutch loose their voting rights in the new company. :mad:

[Pax Vobiscum]

If my experience (not in the airline industry) of takeovers by French firms is any guidance - look out for choppy weather ahead! My favourite French quote: "Of course that looks wonderful in practice, but it could never work in theory".

Good luck to all concerned.

[akerosid]

It's difficult to see how the Dutch public would take to Air France replacing KLM out of AMS; despite its financial problems and its association with Northwest, KLM still has a good service reputation and the two airlines have some similarity in their fleets: both are strong GE airlines and have 744s, 777s (KL's on order) and A330s. The major difference is A320s -v- 737s, but KL's 737-8/900 fleet is small and the -3/400s must be due for replacement pretty soon.

An interesting aspect to this will be the extent Basiq Air (operated by Transavia expands) to take over some of KL's short haul flights. While the French govt makes life difficult for low cost carriers, KLM has been badly hit and of course, Easyjet has a pretty big operation there. I wonder if more KL short haul flights will be operated by Transavia/Basiq.

Interesting also to hear reports that AZ now wants in on this marriage . . .

[Ludo]

Pointer and Pax Vobiscum , I work for AF, and I challenge you to find a better airline to work for. Yes I have worked for other airlines and in other countries, and I can say from experience that it is indeed a fair employer. AND it is making money, unlike many at the moment, AND it hasn't laid off anyone unlike many despite 9/11 and SARS (please spare me the State aids bit, because it didn't receive any since 1994). It is hiring people from other French airlines gone belly up as a priority. Which airline/country could boast the same?
So what do the KLM people should fear? They are loosing money now and would be out of business anyway in a few years if not months, so why AF should be a worse fate than this? :* Is teamwork such a hard concept to grasp?

aeroskid
While the French govt makes life difficult for low cost carriers
French govt is NOT making life difficult for low cost carriers. It is applying the law (no, you cannot cry outrage at state aids for flag carriers and then extort money to minor airports hiding behing the fig leaf of...what was the excuse already?)
Plus, consider those some of those low frills are based outside France, and if they are based in France they employ people with Irish/UK contracts. Which means that there will be less people paying for retirement pensions in France but still working in France! And that those people get less rights that their French counterparts, and lower requirements! For example, a CC on a UK or EI contract is NOT required to have CSS, which French CC MUST have, which is a professional CC licence delivered by the DGAC (French CAA)which grants more professsionnality than a piece of paper delivered in 3 weeks by any scruffy airline. Call the French stupid if they'd rather have it their it way.

Give me a French job any day! :*

[Mick Stability]

I must be missing something here. Where’s the advantage? This is a 20/80 stake for KLM shareholders (which is incidentally the same swap they turned down from BA), and represents a 40% premium on the share price.

But there’s no new identity, no staff cuts, no significant changes for 3 years. I don’t see how much has changed, except AF shareholders are poorer today than they were yesterday. This is like a Christmas Cracker with no snap, no hat, and no toys.

[wallabie]

Bloody good thing that merging.
Think of 2 major performing hubs with still major growth potential linked by the bullet train, networks that, for the most part, complete each other, a rather similar fleet and a long experience in the field. I admit this is likely to give stomach burns to a lot of the twitts whose posts I have had the sad privilege to read over the years.
French take-over ??? Technically yes, practically, everyone knows that they are toes not to tread on if you want things to work which is what evrybody wants.
As an AF pilot, I have no desire to see the KLM colours dispear and let me tell you I am rather proud to be merged with such a fine airline. Just like you have Nissan / Renault or Peugeot / Citroen, you'll have AF/ KLM or KLM/AF who gives a hoot ? So forgive me for prefering to work for AF/KLM rather that some crappy outfit that prizes itself in having cabin crew toss the toilet.
I don't think the Dutch as a whole would accept to see the name KLM disapear, nor would the Dutch governement who by the way owns a golden share to precisely prevent that.
So wingers and all we've taken good notice of your wishes for failure, that'll be an even bigger incentive to make this thing work.
As for the others what Pub should we meet at ?

[Jetlegs]

Wallabie, your enthusiasm is heartening. Something positive on a very sombre day................

Could either you or Ludo confirm or deny the following?
Rumour has it that AF does not pay landing fees in it's home country. And as such, while not receiving state aid, it certainly does get an advantage over for example KLM who do pay landing fees at SPL.

Not that it matters in the grand scheme of things; just curious if it's true or not.

[Lemurian]

Hey! Wallabie,my man!
The old Mc D.O.,of course!
I'm laughing my tripes out...
Really,some people haven't yet realised that indeed the world has changed :Air France,which for the last three or four months has been the number one airline in Europe has pulled off the deal BA and some others have wished for!
And now,the association of the two most efficient hubs on the continent.I guess it would feel rather like a loaded gun pointed right at Mr Edd's temple.
But I remain curious :Is this just the beginning of the realignment of air transport in Europe?What is LH going to do?Is BA going full throttle into a merger with Iberia?
Exciting times,my friends.
Regards:)

Jetlegs
Air France DOES indeed pay all the fees required by air transport regulations.There is even talk that they are paying more than they should to use CDG and other airports.
Your question poses another problem :where do you live if you haven't heard of EU rules on fair competition?
Regards ;)

[Long Haul]

Ludo,
Although KLM has not made a profit in the last two years, they were not in any danger of bankruptcy in a few months or years, as you suggest. They do have, after all, about €900 million in the bank, and a load factor of 85% going for them. The recent losses were mostly bad circumstances and a massive arbitration decision which went against them. What KLM employees and the Dutch public have to fear is this: Fifty percent of all traffic moving through Schiphol airport are transfer passengers. It just doesn't make sense for an airline to have two hubs located so close together, and when the time comes for Air France - KLM to reduce costs, they will do so by reducing the number of flights at Schiphol and keeping the ones at CDG. That means fewer jobs not only for KLM people, but also for the hundreds of other companies who do business with KLM in and around Schiphol airport.
A question.. Although this won't happen for a few years, eventually they might want to merge our two flight operations departments. Does Air France operate completely in French, i. e. the manuals and everything? At KLM primarily Dutch is spoken, but it would be no problem for us to switch to all English speaking operations.

[BahrainLad]

For the transfer "experience":

1. AMS
2. CDG

For operations restrictions:

1. CDG
2. AMS

But if the Belgians build the proposed High Speed rail line around Brussels, and all the other High Speed lines are completed as planned, the Schipol Terminal and the CDG Terminal will only be 2 hours apart......

This should have been BA's deal......they desperately need a large transfer hub on the continent. MAD can't provide it, and ZRH has more restrictions than AMS!

[Final 3 Greens]

Does Air France operate completely in French, i. e. the manuals and everything? At KLM primarily Dutch is spoken

Get some Belgians into management, they understand how to deal with these 2 languages :}

[xyz_pilot]

""""Get some Belgians into management""""

Now thats a good idea, They are SO good at airline management!!!!

[wallabie]

Jetleg

I am happy to confirm you that the rumour you're refering to is utter bullock. We do pay landing fees and you can imagine the hefty amount it is in CDG.
I always marvel at how ill informed or just dishonest people are.
The last time AF received money from the french governement was in 1993..............with the EEC's approval, which means the appproval of all members. Well, not all. I recall the Germans lodging complain which was formaly dismissed. So far so good.
Since then we've been just good little troopers, striking every now and then to get a share of the pie and fate has brought us some good fortune.
As to slots being allocated on a very biased way this can be debated. Should we allow throat slitters like Ryan Air to set foot when we can avoid it, unless we have a death wish the answer is NO. Wether this is enough to explain why we're doing well, I think not. We are just lucky to have a very balanced network/ fleet, a very important domestic market and every time donk has hit the fan we always had some other part of the world to make up for the lost business. Added to that the fact that our management is probably not entirely stupid and here we are........................ARROGANT AIR FRANCE only eager to please your every phantasy !

Yeap ! I'm pretty enthousiastic about this deal. The unknown being how will the two cultures cohabitate ? Time will tell. As far as I'm concerned I don't see why it souldn't work. I mean half the Dutch already own a home in France anyway !

Yes AF operates only in french and I don't see a merging of flight ops in the next future. What is the need anyway ?
Speaking of belgians, we have a few here who sensibly jumped ship some years ago. I'd say they were bloody right !
Mr Edd must be grinding his teeth and looking for his anti acid tablets.

Lemurian

Didn't call you in sick yesterday ? You sound in the best of form.
Go back to bed, stick the thermo into you know what and drink your cordial :D

[click]

Cool observation wallabie!
Just like you have Nissan / Renault or Peugeot / Citroen, you'll have AF/ KLM or KLM/AF who gives a hoot ?
Can we interest anyone in a Skoda in the garage?:E
Anyone? Can somebody buy us please and spare us the slow agony? :{
AF had a little romance with us back hmmm, methinks about 1994 or so, and of course the news was full of it today. According to the (dis) information, we parted on less then friendly terms because of disagreement on the direction the company/government wanted to go. The gov't bought out their share then, resulting in us being virtually owned by the civil servants.
I can't imagine where we'd be if AF was allowed to stay but I can say where we are now...:mad: :\ and whose direction we should've followed.

[A/P Disc]

To my great surpise the Dutch Government said
today in diplomatic terms that there was a major
risk of collapse of KLM in the near future. According
to Dutch sources in France they wanted to get hold
of KLM asap because they feared that LH/BA might
get hold of a bankrupt KLM. (source:eight o'clock news
Holland)

I knew things were not good inside KLM but this
sounds very poorly indeed! So it looks more and
more like a desperate move by KLM to keep on flying.

Rgds

[flyblue]

Air France and KLM to form Europe's largest carrier (30/09/2003)



PARIS (AFP) Air France and KLM agreed to a French takeover of the Dutch airline through a complex deal that will create a new giant in civil aviation.

The new group could become an even more formidable player in the sector if Itay's national carrier Alitalia makes good in its bid to join.

The proposed share-swap announced Tuesday would see the creation of a holding company, Air France-KLM, that would maintain the brand distinctions, hubs and flight networks of the two companies, the airlines said in a joint statement issued in Paris and Amsterdam.

Air France would hold 81 percent of the group, to be led by Air France chairman Jean-Cyril Spinetta, with KLM owning the remaining 19 percent.

"We chose a very simple concept, one group, two airline companies," Spinetta told a press conference from Amstersdam.

On the Paris Bourse Air France shares lost 4.16 percent to finish at 13.12 euros as investors focused on the risks involved in the deal.

"It's a classic reaction," a dealer said. "The hunter goes down and the prey goes up.

"I think there will be a bit of volatility as the implications sink in. While it makes good strategic sense there is a high execution risk and that is reflected in the reaction of the share."

Dutch investors also reacted cautiously, with KLM's share price trailing Air France's indicative value in an exchange offer.

At the closing of the Amsterdam exchange KLM shares were up 12.63 percent from Monday at 13.47 euros after briefly rising twenty percent at the opening Tuesday.

But the share price lagged well behind the value of the exchange offer as calculated by Air France, around 16.74 euros per common share -- which would be a 40 percent rise compared to Monday's closing price of 11.96 euros.

The planned deal means in effect a privatization of Air France, in which the government holds a 54-percent stake. The French state's share would drop to 44 percent once KLM shareholders have exchanged their stock for new Air France shares.

Paris plans to further reduce its holding to "well under 20 percent," Transport Minister Gilles de Robien said later, according to a timetable that had not yet been fixed.

The Dutch government, which owns 14.1 percent of KLM, said Tuesday it had approved the Air France takeover.

KLM, which has struggled to find a European partner for many years, saw sales and its share price drop substantially in the past two years owing to a worldwide slump in the aviation industry, caused partly by the September 11 attacks.

The new Air France-KLM would rank first in the world in terms of sales and third in terms of traffic, just behind American Airlines and United Airlines, Spinetta said.

Responding to concerns about job cuts, Spinetta said: "Maybe we will have to restructure, certainly we have (to), but we have no layoff plan."

At KLM, the workforce would be reduced as employees who retired were not replaced, according to chairman Leo van Wijk.

Dutch unions said Tuesday they would nonetheless scrutinize details of the proposed alliance to determine if KLM's promise that no more jobs will be cut holds true.

Air France unions, most of which oppose the privatization of the carrier, were likewise wary.

"We know few things about the plan and that is what bothers us the most," said Francois Cabrera, secretary general of the CFDT union.

Union leaders made it clear that Spinetta's assurances did little to assuage their anxieties about the future job picture at the airline.

In Brussels, the European Commission said it too would examine the arrangement for breaches of European Union competition law.

Last year, the French and Dutch carriers posted combined sales of 19.2 billion euros, with a workforce of 106,000 operating a fleet of 540 planes serving 226 destinations.

Initially, the Air France-KLM holding is to hold 49 percent of voting rights in the KLM unit, with the remaining 51 percent shared by two Dutch foundations and the state.

That structure is designed to preserve KLM's international landing rights and protect the future of Amsterdam-Schiphol airport, a key consideration for the Dutch state.

Air France's offer for KLM shares values the Dutch airline at 784 million euros (911 million dollars), under a share offer that is to be signed October 15.

Air France has sought listings for the new group on the Paris, Amsterdam, and New York stock exchanges.

In London, civil aviation analysts said passengers were unlikely to see any dramatic changes to routes and fares because of the KLM-Air France deal.

"Customers won't notice much effect in the near future because the airlines will continue to operate as they have been up until now," said Alexander Campbell, business editor of Flight International, an industry weekly.

"I wouldn't expect to see major changes in the routes" serviced by Air France and KLM over the next six to 12 months, he told AFP.


©AFP

[Pointer]

Ever since mister van Wijk took control, his primairy concern was to find a buyer for 'his' KLM. Whenever the deal did not herald a bigenough premium for this farmboy from the netherlands, the deal was off.
Internal support for him was finaly falling below a susstainable level so the deal with Air France was 'his' last resort.
Did you ever see a press meeting when such big news was presented as if it was a funeral? They where falling over eachother to explain why it was not such a bad deal, instead of celabrating this great 'merger'.
The same deal happend with Fokker, mis-management covered up theire inability to run a company by selling it, instead of restructuring. If there is any balls left over in the klm unions they will throw this deal out the window. Not that i say they have to toss the hook-up with Air France, no i think its a good partner. No just throw van Wijk back into the hole he crawled out of and set up a sensible deal. And for all i care they call the new company "
Pprune Air " I guess if nothing changes they will have to change the name of that KLM oriented group (wich calls itself a union) VNV into VFV dependance NL

I haven't seen many reactions from the Dutch pilots though!

this was my two peny's worth.

Pointer

[ICURA?]

Initially, the Air France-KLM holding is to hold 49 percent of voting rights in the KLM unit, with the remaining 51 percent shared by two Dutch foundations and the state.

Good-bye majoity in KLM shareholding ......good- bye KLM.

[Smell the Coffee]

Ludo, your contention that AF is a 'fair' company may not hold true in all areas, especially that of CC recruitment.

But this thread is not about pointing fingers at AF, every airline has its problems.

As for the merger, I honestly think this IS the future...national carriers will cease to exist & will eventually be replaced by trans-European airlines....it's happened in other industries and is long overdue in this industry...the only reason these sort of mergers or "holding companies" have taken so long to come about is due to the outdated regulations that govern who can fly where and how frequently and under what ownership.

AF and KL have started the ball rolling.

[buttline]

Smell The Coffee,

You are right on the money. Expect much more consolidation as ownership laws are relaxed and open skies moves forwards.

Being large allows an airline to negotiate better prices on just about everything (especially new hulls). It makes sense if the complexibility can be managed effectively and it is necessary for Europe to consolidate to compete effectively with the U.S. airlines.

What's next then? BA / Lufthansa??

[Otterman]

Well here is one KLM pilot. Never nice to see your company being sold off. BUT I think most of us are realistic enough to realize that KLM’s time as an independent company was coming to an end. I never got the sense that KLM was in imminent risk of collapse (like some people here are suggesting). Our cash position, and cash flow were nowhere near critical. The huge loss that we suffered last year was largely due to exceptional items like our payout to Alitalia (280 million Euros), and the write-down of our Boeing 747-200/300 fleet to zero (69 million Euros).

Nevertheless the industry has been in a state of constant change for more than two decades now. The USA landscape changed drastically after deregulation in 1978, basically leaving three strategic groupings anno 2003. It is only logical that Europe will head in the same direction. The smaller airlines have a choice to align themselves with a larger partner or being marginalized. I agree that there is a large risk in joining with a larger rival and being marginalized anyway.

I am pleased with the choice of Air France. The two operations have a lot of synergies that can be had. Our networks are absolutely complementary and we control two strategic assets in CDG, and AMS. I also realize that 80% of mergers (take-overs) fail to increase value for all concerned, but there is no reward without risk. I strongly believe that the brand name of KLM will remain for the foreseeable future. I can’t think of a reason to get rid of it. We will be joining Skyteam. Passengers are already used to flying different carriers during a journey, and the branding of Skyteam is what is more important. I think in the future these large alliances will be much like General Motors is now; a conglomerate containing different brands. This is but the first step.

Like my new boss Mr. Spinetta said this one new holding company will contain two brands serving three strategic businesses. Integration at the operational level is something that is not even being talked about at the moment, and I don’t foresee that happening in the short to medium term. This is not a merger along the lines of the Anglo-Saxon model. We are not being swallowed up, digested and sh.t out. There is no talk of seniority integration at all. If that comes to pass it is still many years away.

Our management has been in this state of mind (consolidation) since the mid-eighties. I remember being present at a presentation by our former CEO (Drs. P. Bouw, now heading the board at SWISS) in which he set out his vision on the future of the airline industry (late eighties). He is not the best communicator but he is a visionary in regards to our business. Much of what he setout has come to pass. We will have to adjust and keep plugging away.

As far as being controlled by a French company goes; it is something that we Dutch will get used to, we don’t have a choice. I for one will give it my best shot, there is too much to gain and/or loose.

Regards, O.

[flapsforty]

Had to get some info from KLM Operations this morning. Called them, and the phone was answered as follows:
"Operations, un instant s'il vous pla't"
So I waited, and when the guy came back on line, he laced his talk with all kinds of pseudo french expressions. :)
Humour a pretty good way of dealing with the new reality.

It seems the deal is done, and who knows where it will lead us.
Hopefully to a profit making company with full employment, fair deals for the employees, good career opportunities and excellent seamless service to our passengers.
One can but hope.
If Ludo & Wallabie are an indication of the goodwill and positive mentality present in the Air France community, at the very least, life on a crew-to-crew basis will be pleasant.
Let's plan that drink! :ok:

[Stop Stop Stop]

I agree with Otterman's point of view. As an Air UK pilot, KLM uk was formed, then merged with KLM Cityhopper and now, it would seem, merged with Air France, I am sort of getting used to change! This industry is fluid and I think if a (relatively) small player such as KLM are going to ultimately survive in this competitive environment, then these sorts of mergers are essential.

I gather that there were some long faces in the KLM camp yesterday by some. Possibly, they are suspicious but I say that they must encounter change if the KLM is to survive. We all know that KLM is a bureaucratic, employee laden company being strangled by the unions in much the same way that was happening in the UK before Maggie Thatcher nipped it in the bud in the early eighties and without some form of drastic change, it will not last into the next decade. Within the umbrella of the largest airline in Europe, maybe there will be a future for us all. Maybe even a GOOD future?

However, it was pleasant to hear several Dutchmen saying "Amsterdam bonjour," on the RT yesterday, and the ATC playing along. Very funny! At least these guys seem to recognise the need for change!

[ICURA?]

Two companies , two work forces , one can not help but think about the old management ploy ... "Divide and Conquer". Play one work group against the other. The VNV has stepped up a league ......will they be up to it? Time will tell., But they had better change their game plan from past efforts.

[wallabie]

G'day Otterman, nice to meet you !

I have this very day enrolled into a Dutch course !

For one thing this thread seems to have been spared by our usual cheap tips givers or maybe is it that they've slit their wrists.

Anyone remotly supposing that the KML name would disapear needs to pour himself a straight Scoth RIGHT NOW !

You would have to be the twitt of this century to throw down the drain 80 + years of commercial aviation history, cuz, like it or not, people still fly a carrier and a name, specially when that old. It is a tremendous assett and AF knows it trust me.
That some Dutch worry is only too normal, I'd be worrying too.
Some people here, mostly ground, worry too fearing their jobs might disapear.
I understand the KLM Workers council who has a right of veto gave his thumb up to this, so it can't be all that bad.
As to my enthousiam or my colleagues, it is quite genuine and I'll tell you why, well my perception of it anyway.
We've come a long since 1993 and I'm not about to forget being stranded in Singapore because no aircraft was coming from Paris where " civil war " was waged on the tarmac right in front of the world eye's on CNN. Then came months / years of uncertainty, changes, being the laughing stock of the industry.
We've all worked our toush off to make this airline what it is today with flaws and all, but nevertheless a good one, and we've been blessed to have some inspired managers with ideas and most of all the belief that people do not accept changes if they are wrenched with fear. It is easy to chop off heads by the thousands but by the look on Mr Edd's face last summer, it didn't seem to work miracle. The British public got a taste of french chaos right on their doorstep.
KLM's choice to SIDE with us is in my view the recognition of this work and although having thousands of other interests in life apart from aviation.................it does make me a tad proud.
Good God, I'm getting all weepy and wetting myself.........;Got to sign off.

[flyblue]

Amen, Walla! ;)

[A/P Disc]

Uhm... KLM's name won't dissapear? Aviation
history?? How about Pan Am? Plenty of history
there. And don't forget that they made a deal
about the name. Will be around for 5 years
and after that nobody knows.

Also there's one small problem with KLM's name
and that the word "royal" is in it. (That's the K for
non Dutch speakers). Due to law the royal bit has got
to go now (has happend before with Corus steel plant).

So it would now be LM ! The only one who can stop
the name change now is the queen. Have no idea what
she is going to do about it.

Rgds

[zed3]

.....and what happens to Northwest , surely that will clash with Delta?

[Golf Charlie Charlie]

<<<
Uhm... KLM's name won't dissapear? Aviation
history?? How about Pan Am? Plenty of history
there. And don't forget that they made a deal
about the name. Will be around for 5 years
and after that nobody knows.
>>>

Well, Air France, I am pretty sure, said that UTA and Air Inter would survive when these airlines were taken over during the past 10 years. Yet where are they are ? Now, of course, the KLM deal is a cross-border operation, which makes the durability of KLM longer, but when the open skies agreements are in full force and ownership rules are fully relaxed, I wouldn't bet my bottom dollar on KLM surviving.

[OldAg84]

As a forty someodd year old aviation buff and frequent SLF, I just this very morning found something ironic in a box from my parents- a 24-27 year-old self-made "airport loading gate diagram". I only mention it because of all the airlines listed that have "gone away" in the interim, either through mergers or failures, or both-

Braniff
TWA
Eastern
National
Piedmont
Oversea's National
Allegheny
Pan Am
Sabena
Swissair

That's just on my list from childhood.

It's sad to see KLM possibly go away...now to the real questions-

How will this impact the Skyteam or other alliances- will it be for better or worse!

[Final 3 Greens]

wallabie

The British public got a taste of french chaos right on their doorstep

I suggest you stick to matters that you understand.

French chaos means thousands of workers causing mayhem by going on strike and thats not what happened at Heathrow, where a very small number of people decided to walk out unofficially.

And the dispute was not about job reductions.

If I were Mr Edd, as you put it, I'd be pleased with this outcome. BA can expect reduced competition from AMS and AF, who I believe are a strong airline, will have it's hands full with the fallout from the acquisition; that's no sideswipe at KLM, just a few grey hairs of experience from dealing with the aftermath of multinational acquisitions .... and if it is handled as a 'merger', then that will increase the workload and suit BA even more.

[Lemurian]

Final 3 greens
Why the need to be so shi*ty?
I beg to propose that who better than a Frenchman knows about chaos mettled by the smallest possible number of workers going about a strike/stoppage/wildcat action (you name it).
And whether the BA action was not related to job reductions has no relevance here.
Finally if the merger makes Mr Edd happy,we should all celebrate it to-gether.
Regards.

[wallabie]

Terminal 3 Green

Why do I have the nagging feeling I pushed some button in you ?
You want to talk about it ? Get yourself comfy and give me 50 quids.
I feel honoured to be spanked by someone who is obviously a high flyer.
International mergers experience ?? Who the hell are you ? Having fun surfing the net between 2 board meetings to release the tension ??
Everything is going to go just fine and no one, exept Mr Edd and your good cranky self, is going to get grey hair.
I do concur with Lemurian, a very small number of workers succeeded in bringing total chaos in Heatrow not giving a toss about the people who were trying to leave the country. You'd think they were sent to summer camp in France to train !!
And by the way, trust me, I know a thing or two about chaos ! :D

[ICURA?]

There appears to be two points of view here. And it looks to be divided between those that have read their history books and those that hope/wish for the best. I would like to be the latter but years of dealing with management tends to lean me towards to former.

[ATC Watcher]

A /P disk you are probably correct in saying that the Royal "K" will have to go if KLM is privatised and in hands of another country.

But it does not mean that KLM name has to go, the K could have another meaning, I would propose "Kikkers" (that would translate in English as Froggs Airline Company) apropriate no ?:D

More seriously, I praise Otterman views ,but will they be shared by the VNV ? Also I find it strange that no official reaction ( yet ) from the US side . Normaly they are quick to react when their interests are shaken... And they will be be with this merger...

Anyway I wish the newly weds all the best, the latin ( a bit cahotic but financially successful) lover getting into bed with the clever, efficient nordic blond. The offsprings should look nice.

P.S: for the AFR crews wanting to play along : Bonjour is " Rouille Morgue " Au revoir is " Tott sinnss " ,and je t' aime " Ique rao fan yao." ( on reste Francais partout !)
More of those on request .

Watcher:ok:

[buzz boy]

I am repeating what i said in a previous thread.

the smaller company in any takeover always suffers, mind you it is kind of justice to KLM as they have always been so arrogant in the way they have treated competition and takeovers in the past they really deserve a taste of what is to come!!!(remember the AirUk takeover!!!)

The French really believe the world revolves around them and if KLM and their pilots believe they can influence things they have a rude awakening coming to them.

tel est la vie

Zulk is levens

[Final 3 Greens]

wallabie

Who am I? I'm a consultant who deals at board level with global organisations in the area of project management and organisational change.

I'm glad that things are going well, because you are starting the planning phase of the change lifecycle. Some people will be pleased/excited by this and others disappointed. But just wait until you are in the executing phase, you can expect disbelief, denial and depression amongst others and it is at that stage (quite some way in the future) that your leaders will, by their actions, determine whether the new organisation integrates and succeeds.

Let's make a deal - I won't claim to be an expert on flying ('cos I only drive a little spam can), but please accept that I do have a least some competence in the aftermath of international acquisitions.

BTW, please note that I have not criticised AF or KLM, if the acquisiion is successful, then the emergent organisation will be very strong indeed; Its just that experience leads me to believe that it will be very challenging and that is why BA stand to gain in the medium term, whilst AF/KLM go through a period of understandable introspection.

[flapsforty]

Final 3 greens, could you explain a bit more extensively what you mean by the challenges that will face us in the future?
I know a lot about pouring coffee and very little about macro-business ;) but eager to learn what our joint future might hold in store for the work forces of both AF and KLM.
Would also appreciate an insight in the various courses of action you think might be taken by our Glorious Leaders and what their effects might probably be on the success of this venture.

Quite understand if the answer to my questions would take too much time for you, but if you do have some spare time, I would genuinely be interested in knowing a bit more......

[Final 3 Greens]

Flaps

Its a big subject, but some pointers to what you may experience would be:

- integration of two fine national cultures, which are different in some ways

- the decomposition of the big picture into detailed plans, with the complexity and confusion often arising, typically extending timelines well beyond original estimates

- resistance by people in both companies who don't like the changes (and what it means for them personally), often in the form of passive resistance, e.g. lip service and inaction to promote hidden agendas

- large amounts of management time required to manage the people and other issues that arise

The above are an oversimplification, but change is so culturally contextual that it is difficult to be more precise.

In terms of the leadership required, again an oversimplification, but:

- create a clear and strong vision of where the company is going to

- constancy of purpose (don't be deflected from the goal, but be prepared to be flexible to get there)

- strong and continuous communication (2 way)

- where necessary, take tough decisions and implement them, but understand the impacts and be sensitive/humane

If you are really interested in managing change, there is a good book (quite readable) by 2 Brits, Binney & Williams, called leaning into the Future, ISBN 1-85788-082-X, which explains the process in practical steps and talks about working at an operational level, which is often missed out in some other references, that focus on the strategic space.

Hope this has been of at least some use.

And by the way, about 70-75% of large change initiatives fail to deliver their objectives (Depending on what research one believes), but that means that 30% are steered to succuessul conclusions, so it can be done ;)

[flapsforty]

Thank you kindly Final!

Paperback edition of the book "currently unavailable" from Amazon, so I'll have to see if I can get hold of it some other way.

Slightly pessimistic about the abilities of our management to suddenly understand the impacts and be sensitive/humane.
But who knows what miracles their French counterparts will be able to wrench from my countrymen? ;)

[Final 3 Greens]

Flaps

If B&W are out of print, there are a few morsels on this site to look at .... http://www.change-management.org/articles.htm

Talking about Dutch sensitivity, I did a piece of change work in Amsterdam and found the culture in that company to be very conducive to sensistivity.

That didn't mean they avoided the tough decisions, but the obvious empathy for the workers meant that the decisions were largely accepted as being bona fide.

Of course, the client was not KLM and I do not know the culture of your management team (although I have worked with other airlines), but heres hoping that they have those qualities too.

The bottom line is that change is always more difficult to implement than envisaged and big change os the same, but big time!

Thus my comments to wallabie, whilst tongue in cheek, were based on over 10 years of observation.

[Lemurian]

Final 3 greens
Now I know why a Scout leaders' course is so valued on a job application in business;)
What you're writing seems almost to a word taken from a Scout troop management manual,sensitivity and al.
I submit to you that we in Air France have had the sort of experience you refer to :the integration of UTA (privately owned with an important employees share holding) and Air Inter (ditto but used to a fierce railway competition) has been quite a success in incorporating two vastly different cultures into state-owned ,civil servant staffed AF,don't you agree?
Furthermore,that integration went along with another sense of purpose among the employees (as wallabie said we worked our toush off but we can be proud of what has been achieved).
There is something that you did'nt explicitly list in your post,though;it's called Vision. It is probably due to the lack of it so far that this merger is the first one in Europe.
I believe it will be followed by quite a few others.
Regards.

[Pax Vobiscum]

Here's what The Economist (http://www.economist.com/displaystory.cfm?story_id=2098740) has to say.

I think Final 3 Greens is spot-on with his first comment "integration of two fine national cultures, which are different in some ways", except that I would say "different in most ways". Read Hofstede's "Dimensions of Cultural Difference" (1980) to see what I mean.

[Final 3 Greens]

Lemurian

Having had little contact with scouting, I don't know much about the 'best practices' (apart form learning to tie some useful knots as a kid!), but change management isn't rocket science .... just difficult to do well in complex environments.
There is something that you did'nt explicitly list in your post,though;it's called Vision
You probably missed this line about 2/3 down in the post, as the first point about what is required from leaders ..... create a clear and strong vision of where the company is going to
And it is vital, I agree.

As to Air France, Air Inter and UTA, I don't know much about that operation, but seem to remember that the two companies were acquisitions, rather than mergers? (please correct me if wrong.)

Acquisitions tend to be marginally easier to deal with than mergers and rather easier than joint ventures, because on company has purchased the other and is in a better position to drive the change process.

Some are easier than others, e.g. the BA acquisition of Dan Air, where the alternative to losing much of the Dan Air was to lose all of Dan Air.

A little like in negotiation, when people can focus on the best alternative to the change, it is easier to gain acceptance.

In other words, if you will have no job next week, then you are more likely to accept what you would consider otherwise to be inferior conditions. The great danger for change managers is when people focus on today (which is well known and often comfortable) and then judge the future change against that experience.... resistance is the usual result.

However, none are easy and any well run integration is impressive, so well done to AF if the Air Inter and UTA integratiosn went well

Pax Vobiscum

Hofstede is an excellent reference.

His 1994 work 'Cultures and Organizations; Software of the Mind"\ is a good work too, for anyone on the forum interested in this type of thing.

With regard to the cultures being 'different in most ways', there is a trap that we can fall into of noticing only the cultural differences and not the samenesses.

So yes, some aspects of Dutch and French culture are very different, but many of the underpinning values and behaviours of Af and KL are pretty well aligned, e.g. safety, customer service orientation, flight deck standards excellence.

In this airline oriented context, I'd therefore stand by the 'some differences' view, although at the macro level, there are many differences as you say.

[Kwasi_Mensa]

These so called Air France guarantees are soft as hot butter. Guarantees granted by Air France that Schiphol will keep their lucrative intercontinental destinations are subject to the clause that these are in the interest of the shareholders, which are in majority the French State and Air France. No doubt if it's in the interest of AF the majority of shareholders will vote against KLM/Schiphol.

Of the original 58 intercontinental destinies KLM can only continue 42 the next 5 years (if it's in the interest of the shareholders), the other 16 have still to be negotiated. Neither are the frequencies agreed upon, neither are there any agreements about the European network.

Another point, AF has ordered 10 A380's which no doubt will be operating from CDG and will seriously inflect the stream of passengers from ASD. Delivery of the 380 will start in 2007 (5 years from now...).

Schiphol's position has become unclear overight and I abhor the possibility to be forced to fly intercontinental through CDG. I absolutely HATE this apt.

"integration of two fine national cultures" is crap. There will be no integration because Air France owns KLM and we know how autocratic French companies are. Van Wijk after his former merger disasters had to close this deal. His head would have been on the block if it hadn't been. Most mergers are anticipated way to optimistic, I've just seen one gone down the drain completely from one of my business partners, involving a lot of dismissals and loss of capital. I'm very pessimistic about this.

[PAXboy]

Just as an observer in this but with 23 years in commerce and working for UK, German, USA and Hong Kong companies and having seen the fall out of international mergers and acquisitions over the years ...

When you want to combine two organisations, irrespective of whether it is a merger or take over, one of the good paths is speed. That is, devise the new plan and get it in place. If people have to go (duplication or other reason) then they must go FIRST. Then gather together all that are left and tell them how much you love them and ask them to love the customer.

Here, the process will be drawn out. Decisions about which people have to go (the back office first) will be delayed. This will dampen the mood of everyone as they wait for the axe to fall. Some will drift away of their own accord but most will cling on, hoping for a pay off or to reach retirement age.

After five years, most of the merger will be deemed a fantastic success and a new livery will be revealed. Meanwhile, thousands of folks will continue to grumble to the press about how bad it is.

Sorry but that seems the most likely. The problem is heightened by the fact that cross border ownership of airlines has been delayed too long. The problems have got very big, so the resolution will not be as simple as it might have been five years ago.

From The Economist (edited): "Air France and KLM aim to create a complicated structure that will protect KLM’s Dutch identity: there will be a holding company of which KLM will be an “independent” subsidiary, if that is not a contradiction in terms."

They go on: "... and there are no redundancies planned, despite both airlines’ bloated staffs. All of this will make it tough to achieve the cost savings that inspired the deal in the first place."

Many countries still see the airline as the highest representation of the country and, consequently, it's take over is seen as losing the 'war' and a national disgrace. It isn't but it seems that way to them.

In another ten years we shall see a truly different set of carriers. Most of which will have new names except that we already know these names. They are:
oneworld
Sky Team
Star Alliance
etc.

As for CDG and AMS, I don't use either very much so am not greatly affected. From all that I read, they both have equal strengths ... at losing your case. ;)

[Cruise Alt]

Congratulations to the Dutch. Someone has finally managed to get a job with Air France WITHOUT actually being French!

[Final 3 Greens]

Paxboy

irrespective of whether it is a merger or take over, one of the good paths is speed

I had the good fortune to listen to a very experienced M&A man talking about this very facet.

The reckoned that speed was the absolutely crucial driver in delivering benefits - you observations align with what he said precisely.

Kwasi Mensa

"integration of two fine national cultures" is crap.

No it is not. To leverage the benefits, you have to integrate.

However, integration is not the sunny uplands of contentment.

[PAXboy]

F3Gs, thanks for that. Having been in Telecommunications and IT for many years, we were at the sharp end of this process! Sometimes, the benefits were by linking the technology and cutting the people or just cutting the people! In technology, I have worked in retail, government, freight transport (air and sea), banking, agri-business, pharma and others. I have no doubts that the air line business will be subject to the same problems.

Other airlines will be watching closely to see the mistakes and learn from them, as the consolidation gets under way. With regards to speed, when BA was getting ready for sell off, I understand that the process was I mentioned in my earlier post: Complete the deal. Cut the staff heavily. Love them. Get them to love the customer. (I sit to be corrected)

From what I saw of BA as a customer - it worked. It is on this that I predict the final 'medicine' required for AF/KL will be worse than if folks were tough now. If humans have decided that financial targets are the ones by which we wish to live, then national pride is going to meet the money head-on.

Whilst the parties may say that this is a new experiment - it isn't. Cross border partnerships and take-overs have been happening for many years. BMW and Rover failed in cross border cultural exchange. I worked for both nationalities and was not surprised. I have never worked for the French or Dutch, so cannot say if they will encounter similar problems. However, this deal is being driven by a fear of being the next Sabena or Swiss, rather than more positive ideas.

If I was a small fish in either company, I'd probably just hang on in or find another job. The pay-offs are too far away to make it worth waiting for them. Sorry to be so negative, I have no doubt that many decent people will be hurt in the next few years.

[LGS6753]

With limited, but some, experience in M&A, I can see the next few years being very challenging for the new entity. The multi-national aspect makes the job harder.

What no-one on this thread has mentioned is how the real competitors will react. I mean FR and EZY. The latter has small operations at both CDG and AMS, and they must be licking their lips at the thought of any errors in KL/AF delivering more pax to them.

If I was an orangeman, I'd be looking at putting some of my shiny new 319s into AMS to challenge KLM on its most lucrative trunk routes.

Even if AF and KLM get it right, the necessary introspection a merger creates will take management eyes off the ball to some extent, and there are lots of new hungry locos out there...

[OldAg84]

F3G

I will throw into the conversation the following- there is not much functional difference between a merger and an acquisition- almost always somebody get's the short or shorter end of the stick. But let's hope I'm wrong.

[Final 3 Greens]

OldAg84

In my experience there are only really acquisitions and joint ventures.

Mergers inevitably get driven by the dominant pary, as you imply, but often get distracted by the need to be seen to bbe acting in the spirit of the merger - e.g. balancing the allocation oef executive and management roles.

JVs are a potential nightmare, with the vested interests of the partners impacting on the new organisation too.

LGS6753

Agree that introspection is inevitable - and it is a cruel world out there.... however, if they do get it right - it will be a strong outfit, so lots of risks and potential benefits to juggle

[ICURA?]

Just a thought?

How this for a scenerio?

Intercontinental flying starts to be based more and more from CDG or ORY .... why not Orange flights taking up the slack at AMS. They do have a European feeder network

[Pax Vobiscum]

F3G - thanks for your helpful comments. I agree with your conclusions, but I would draw a distinction between corporate culture and national culture. I expect that safety, customer service and flight deck excellence would be pretty much at the top of corporate culture for any major airline, but how you set about achieving them is often dominated by national culture (and management ignore national cultures at their peril). The national cultures of France and the Netherlands are as different as chalk and cheese (perhaps a better analogy would be Edam and Roquefort)!

I've read (far too) many statements of "Corporate Values" (usually 10 in number for some reason) and they should all contain the rider "but any and all of the above may be dropped in a heartbeat if the board perceive that to do so will increase the value of their share options by 0.1%".

Cynical, moi?

[Final 3 Greens]

Pax

Yes, you are quite right to draw distinctions between corporate and national cultures if we are doing a proper analysis.

And your comments about the 'what' and the 'how' are also valid.

Must say, that in my experience of working with airlines (but neither of these two), there is definitely a division between 'the company/management' and the 'airline/operations.'

In the latter category, there is a lot more grass roots co-operation than one might expect, even between competitors and maybe this will help the merger. I had this factor in mind when talking about mutual shared values and I was thinking at ops level.

I certainly understand your perspective on management decisions :}

Just as an interesting exercise, try to think about common shared values between France and the Netherlands. It would be interesting to consider social values (e.g. working time, pensions etc.)

As Ed Schein (emeritus prof of business admin at MIT) once said at a programme I was fortunate enough to attend, the differences are very obvious and they often distract from noticing the samenesses.

I must admin that I notice the US value set to be quite different from the European (and I not judging superior/inferior), despite the common language.

I think we're probably boring the airline peeps here, but it's good to talk :O

ICURA

If you wish to be really contentious and speculative, how about BA get hold of a load of Schipol slots and move the LGW business across to LHR, moving long haul LHR flts to AMS, thus creating a feeder service from the continent and the UK regional airports?