Airfrance Klm Merger Case
1. Introduction
In 2004 Europe’s largest airline group was formed after the European Commission had approved a merger between French Air France and Dutch KLM. A merger of this dimension certainly has major influences on the economy. This paper will give an insight on the incidents of this instance, the economic consequences and it will deal with the question whether the European Commission’s decision was reasonable.
First of all the two firms will be introduced and an overview about the merger will be provided. After that some basic economic concepts will be explained, followed by a merger’s consequences on the economy. The next part will then deal with the European Commission, in particular their investigation of the situation and its resulting decision. In the very end a conclusion about the whole case will be drawn.
2. The Merger
Air France is a Paris-based, French airline. It operates worldwide from its international main hub at Paris Charles de Gaulle International Airport and within France from its national hub at Paris Orly Airport. Furthermore, Air France is one of the founding members of the SkyTeam, which is an alliance of several airlines from all over the world. At this date SkyTeam was the third largest airline alliance in the world, following oneworld (British Airways, American Airlines, etc.) and the Star Alliance (Lufthansa, Singapore Airlines, United Airlines, etc.). Before the merger Air France was controlled by the French government, which owned 54.5 percent of the airline’s shares. During the merging-process, however, the state reduced its share to 18.6 percent and thus privatized Air France.
The object of acquisition, KLM, is a Dutch airline with its main hub at Amsterdam Schiphol Airport. Its most important business units are passenger and cargo transport within Northern Europe and to the Far East (EC, 2004a). Since 1989 KLM also operates in a joint venture on transatlantic routes with Northwest Airlines, one of the United States’ largest
In 2004 Europe’s largest airline group was formed after the European Commission had approved a merger between French Air France and Dutch KLM. A merger of this dimension certainly has major influences on the economy. This paper will give an insight on the incidents of this instance, the economic consequences and it will deal with the question whether the European Commission’s decision was reasonable.
First of all the two firms will be introduced and an overview about the merger will be provided. After that some basic economic concepts will be explained, followed by a merger’s consequences on the economy. The next part will then deal with the European Commission, in particular their investigation of the situation and its resulting decision. In the very end a conclusion about the whole case will be drawn.
2. The Merger
Air France is a Paris-based, French airline. It operates worldwide from its international main hub at Paris Charles de Gaulle International Airport and within France from its national hub at Paris Orly Airport. Furthermore, Air France is one of the founding members of the SkyTeam, which is an alliance of several airlines from all over the world. At this date SkyTeam was the third largest airline alliance in the world, following oneworld (British Airways, American Airlines, etc.) and the Star Alliance (Lufthansa, Singapore Airlines, United Airlines, etc.). Before the merger Air France was controlled by the French government, which owned 54.5 percent of the airline’s shares. During the merging-process, however, the state reduced its share to 18.6 percent and thus privatized Air France.
The object of acquisition, KLM, is a Dutch airline with its main hub at Amsterdam Schiphol Airport. Its most important business units are passenger and cargo transport within Northern Europe and to the Far East (EC, 2004a). Since 1989 KLM also operates in a joint venture on transatlantic routes with Northwest Airlines, one of the United States’ largest