Merger leaves Irish airlines ‘unscathed’

THERE should be little immediate impact on Aer Lingus and Ryanair following the merger of Air France and Dutch carrier KLM to create Europe’s biggest airline, analysts predicted last night.

The creation of Air France-KLM will form the third-largest carrier in the world with annual revenue of about €19.2 billion.

NCB Stockbrokers' airline sector analyst, Shane Matthews said the deal may even open up opportunities for Ryanair's point-to-point routes in Europe as the new Air France-KLM entity consolidates its hub operations.

"This deal is a potential milestone in the European airline industry as it sees the formation of a holding company which is expected to overcome any nationality issues with regards to international landing rights.

"Should this structure stand up to closer examination it could prove a platform for further deals within the sector. However, we would downplay this speculation at this point in time as we do not see either British Airways or Lufthansa being too aggressive on this front in the immediate future," he added.

And Europe's biggest airline, British Airways, called for competition authorities to look hard at the impact of the Air France-KLM deal.

British Airways said it expected Europe's competition watchdog to give Air France and KLM the same scrutiny it had given BA's own former plans for alliances.

Ryanair called on the European Commission in its review of the Air France/KLM merger to require Air France and the French Government to promote more choice and competition in the French marketplace.

It also wants the commission "to bring about an end to the legal manoeuvres by which Air France and its partners have sought to restrict competition, limit the spread of lower fares and wider consumer choice in regional France in particular".

The precedent-setting transnational deal will see the French carrier acquire its smaller Dutch rival for €784 million in stock.

KLM shareholders would own 19% of the enlarged company, while the French state would see its stake fall to 44% from 54%. Other Air France shareholders would own the remaining 37%.

The airlines will create a holding company that will enable each carrier to retain its own brand and employees and most of its route networks.

The merging carriers said that Italian carrier Alitalia SpA, already a member of Air France's SkyTeam alliance, may be included later in the new company.

The linkup will give the company control of two of Europe's four biggest hub airports Paris's Charles de Gaulle and Amsterdam's Schiphol. British Airways dominates London's Heathrow airport, while Deutsche Lufthansa has Frankfurt airport as its hub.

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