KLM, Alitalia plan full merger

AMSTERDAM, JULY 31: KLM Royal Dutch Airlines and Italian carrier Alitalia said on Friday they planned to create Europe's biggest passenge...

AMSTERDAM, JULY 31: KLM Royal Dutch Airlines and Italian carrier Alitalia said on Friday they planned to create Europe’s biggest passenger network and could transform their global alliance into a full merger.

Although the airlines will continue to operate under their own names, they are to be run from November 1 under a single management for passenger and cargo traffic and take joint decisions on purchasing and investment.

Giving details of their global alliance announced last November, the two carriers pledged to "continue studying further Financial, organisational and legal integration" with the aim of strengthening their ties by April 1, 2002."This agreement marks a step-change in the evolution of airline alliances and will benefit customers by delivering the most complete integration of commercial passenger and freight operations in our industry," KLM Chairman Leo van Wijk said.

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Alitalia’s Managing Director Domenico Cempella said the tie-up pointed the way forward for the airline industry. "Thealliance between Alitalia and KLM represents a completely new industrial model for air transport in Europe which is based on an unprecedented depth of cooperation between the two companies."

News the two airlines had ironed out final details of their cooperation came a day after reports that U.S. Authorities may block a planned link-up between British Airways and American Airlines.

The new network, revolving around the hubs of Amsterdam’s Schiphol airport, Milan’s Malpensa and Rome’s Fiumicino, goes several steps further than existing alliances, like the One World partnership that includes British Airways and American Airlines and Lufthansa’s Star Alliance.

KLM and Alitalia aircraft will serve 377 destinations in 87 nations and the way is clear for Alitalia to join KLM’s tie with U.S. Northwest Airlines regulators permitting. KLM and Alitalia said they were "optimistic" their deal would win EU approval. The EU’s executive Commission said earlier this week it had extended to August 11 its deadline torule on the alliance in order to review undertakings offered by the companies to address competition problems.

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The European Commission also has yet to rule on the code-sharing agreement with Northwest, which has been under investigation for three years. KLM Chief Financial Officer Rob Abrahamsen said that a full merger was one of the options on the table.

"We don’T exclude anything, but we don’T include anything either. We go for quality, we will study whatever forms there are to get maximum benefits," he told Reuters in an interview. KLM shares in Amsterdam climbed three percent to 24.90 euros on the deal. Alitalia kept pace in Milan, rising over 2.35 percent to 2.61 euros.