Airline is not like other businesses and so merging them is a tough job. Assets such as the nature of international air traffic rights, airport landing slots, air traffic control requirements, and other regulatory approvals cannot smoothly shift from one owner to another.

Buying an airline does not necessarily mean grabbing all airport slots in addition to having your own. Such an attempt could create a pandemonium among the other airlines in the queue. The merger of Air France and KLM has had its share of squabbles but it has finally been completed.

On September 30, 2003, Air France announced a takeover of KLM Royal Dutch Airlines. The news created disturbance among other players, particularly the European ones. EasyJet, Europe’s second largest budget airline had submitted an appeal to The Court of First Instance in Luxemburg, requesting to terminate the European Commission’s clearance of the Air France and KLM merger. The company supported its stand on the grounds that the merger would substantially reduce consumer choice and that the French airline industry is trying to strengthen its monopoly on the major domestic routes. The competitors also feared that the merged entity would crystallize, in terms of revenues, and this would result in tougher competition. In spite of this, the European Commission, whose authority is binding, cleared the merger between Air France and KLM in February 2004 subject to obtaining assurances from the Dutch and French Governments that they would bestow traffic rights to other carriers also and would avoid modification of prices on long haul routes. This paved the way for Air France and KLM to release a framework agreement according to which Air France will acquire control over KLM.

On May 4, 2004, Air France successfully created the world’s largest airline with the consensus of the KLM shareholders. Air France KLM was created by acquiring 89% of the share capital of Dutch carrier KLM in an €800 mn ($950 mn) takeover bid, heralding a new era in air travel.

France, airline, merger, European, Assets, assurances, appeal, squabbles, shareholders, revenues, modification, monopoly, merging, international, Instance, landing, grabbing, framework, agreement, competitors, approvals, tougher, terminate.