All these factors explain the very specific form of
merger decided by Air France and KLM. Leo van Wijk and Jean Cyril Spinetta
decided that, given the changing situation in air traffic relations, it was
very unlikely that a non-European State would use the merger as a pretext to
withdraw the traffic rights that it had granted to KLM. It was still legally
possible, but the risk was low. Air France and KLM considered that they could
take the risk of merging. And so far they have been proved right, as no
non-European State has made signs of wishing to withdraw its traffic
rights.
One reason for this changing trend dates back to March
2000. At this time, the European Union Heads of States and Governments met in
Lisbon and agreed to make the EU «the most competitive and dynamic
knowledge-driven economy in the world» by 2010. This was a very ambitious
goal and gave rise to a lot of initiatives. The aim was to create a
pan-European innovation system. The idea was to shift from the creation of
national champions to more pan-European enterprises. So Air France and KLM
combination spearheaded this trend.
The two companies quickly realized that theyshared
exactly the same vision of the future of our business:
v Firstly that
consolidation was necessary, particularly in Europe. This was because they
needed to create pan-European leaders to match the size of the huge Single
Market.
v Secondly, for
the sake of economic efficiency, they had to have a common bottom line.
They also had to take into account the emotional
factor. This is why they quickly realized that the only possible organization
was to create a new concept of one group - AF-KLM - which involved merging
shareholdings and sharing the same bottom line - and two companies, which
implied coordination rather than integration. That covered the emotional
side.
Air France and KLM were two efficient airlines - KLM
was reaping the benefits of a radical recovery plan, and Air France was
consistently posting profits - but they were at risk.
This might seem contradictory, but in fact it's not.
They were at risk because they were middleweight champions in a heavyweight
contest. In an increasingly global industry, they needed to gain critical
size.
The consensus view is that world air transport will
ultimately be organized around three major alliances - Star, SkyTeam and
Oneworld.
Obviously Air France and KLM had to belong to an
alliance but that's not enough. They also need to make themselves heard and to
influence the decisions to come. In the long-term, Air France would not have
been able to do this alone. Air France-KLM guarantees that a European carrier
will play a leading role in SkyTeam. This common ambition that Air France
and
KLM share did not come from a desire to dominate. It
came from a legitimate wish to ensure profitability for both airlines and to
play a global role in the air transport industry.
But governments and public opinion would most certainly
have refused the merger, if they hadn't respected national identities and
interests.
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