Airlines stop short of full merger

Air France and Dutch carrier KLM will unite beneath the same corporate umbrella but stop short of a full merger under proposals being examined today, a trade union leader said.

The plan calls for Europe’s second and fourth largest carriers to create a holding company and unite by becoming its subsidiaries, Francois Cabrera, a leader of the CFDT union, said after meeting Air France managers.

“The wedding plans have been announced,” he said.

The plan left open the possibility of a complete merger in the future. Air France and KLM would retain their brand names for at least eight years, but the proposals do not spell out what would happen after that, said Cabrera.

That suggested that the airlines could eventually merge completely.

The French carrier’s board was examining the proposals at a meeting at Air France headquarters near Paris’ Charles de Gaulle airport tonight.

Many details remain to be worked out including the value of shares to be exchanged, said Cabrera.

But the French government’s 54.4% stake in Air France would be diluted to under 50%, he said. That would move the carrier further toward the French government’s goal of privatisation.

Some analysts said Air France could also use its board meeting to announce a timetable for expanding the alliance to a third partner – Italy’s Alitalia.

Alitalia has expressed interest in joining KLM and Air France in a three-way alliance. The Italian airline was also holding a board meeting today.