Air France, KLM unveil biggest airline deal

Air France and KLM unveiled plans on Tuesday to create Europe’s biggest airline in a deal that would see the French carrier acquire its smaller Dutch rival for 784 million euros ($913.9 million) in stock. KLM shares soared as much as 20 per cent, but Air France stock slid 6 per cent after Europe’s second and fourth-ranked airlines revealed their proposed alliance, which Italian flag carrier Alitalia may join later. Some analysts said Air France’s offer seemed high, and that the tie-up would not bring all the benefits of a full merger because some parts of the two airlines would continue to operate separately.

Air France chairman Jean-Cyril Spinetta forecast 600 million euros in annual long-term merger benefits and said no lay-offs were planned. Current KLM shareholders would own 19 per cent of the enlarged company, while the French state would see its stake fall to 44 per cent from its current 54 per cent. Other Air France shareholders would own the remaining 37 per cent. A successful Air France-KLM combination could serve as a model for other full-service airlines struggling with economic slowdown and growing competition from no-frills carriers in an already overcrowded market.