Air France seals KLM bid

Air France has succeeded in its bid to create the world’s largest airline by revenues, winning over 89 percent of the share capital of ...

Air France has succeeded in its bid to create the world’s largest airline by revenues, winning over 89 percent of the share capital of Dutch carrier KLM in an 833 million euro ($995.7 million) takeover bid that may herald a new era in air travel.

In a joint statement on Tuesday, the airlines said KLM shareholders had tendered 41.76 million shares, or about 89.2 percent of the airline’s capital, in the offer which closed Monday night. The combination represents the first cross-border merger of major European airlines and creates a company that ranks ahead of Japan Airlines System Corp. as the largest airline in the world by sales.

Air France-KLM will rank third behind AMR Corp.’s American Airlines and UAL Corp.’s United Airlines in terms of passenger traffic.

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The carriers believe the deal will allow them to cut costs and enhance revenues, helping them battle overcapacity in the market and face off growing competition from no-frills carriers. They have forecast 600 million euros in annual long-term merger benefits, while playing down the risk to jobs.

Under the terms of a deal that was originally unveiled last September, the two airlines will form a joint holding company under which the Air France and KLM brands will co-exist for three years.

The company, Air France-KLM, will own 100 percent of both airlines but KLM will remain Dutch, with 51 percent of its voting rights held by the state and two foundations. That structure will allow KLM to retain its foreign landing rights. The response to the offer was well above the 70 per cent acceptance threshold that Air France management had said it needed to call the takeover a success.