- Title: FRANCE: AIR FRANCE AND KLM HAVE UNVEILED PLANS TO CREATE EUROPE'S BIGGEST AIRLINE
- Date: 30th September 2003
- Summary: (W4) SCHIPOL AIRPORT, THE NETHERLANDS (RECENT) (REUTERS - ACCESS ALL) 1. SV AIR FRANCE AIRCRAFT ON TARMAC PASSING BEHIND TAIL OF KLM AIRCRAFT 0.14 (W4) SHERATON HOTEL, NEAR SCHIPOL, THE NETHERLANDS (SEPTEMBER 30, 2003) (REUTERS - ACCESS ALL) 2. LV MEDIA AT NEWS CONFERENCE 0.19 3. SV/CU OF AIR FRANCE CHAIRMAN JEAN-CYRIL SPINETTA (WITH GLASSES ON LEFT OF FRAME) SHAKING HANDS WITH KLM'S CHIEF LEO VAN WIJK (2 SHOTS) 0.31 4. LV NEWS CONFERENCE 0.34 5. MCU (English) JEAN-CYRIL SPINETTA, AIR FRANCE CHAIRMAN SAYING: "Today we, Air France and KLM, two major flag carriers, have decided to combine our strengths and create Europe's first airline group. An operation like this brings many challenges while taking the interests of our shareholders into account we must comply with current regulations, harmonise two very strong corporate cultures and give solid assurances regarding the future development of the two companies." 1.09 6. LV NEWS CONFERENCE 1.14 7. MCU (English) SPINETTA, SAYING: "As I said before it is a recommended public exchange offer. We propose that KLM's shareholders receive 11 Air France shares in exchange for 10 KLM shares. These Air France shares will come from a new share issue reserved for KLM shareholders." 1.37 8. LV NEWS CONFERENCE 1.40 9. MCU(English) KLM CHIEF LEO VAN WIJK SAYING: "In order to protect KLM's nationality, for the time being only 49 per cent of the economic interest will have voting rights associated to it in KLM, which consequently means that 51 per cent will be managed through a number of vehicles, two foundations, the Dutch state will continue to have it's voting rights through the preferred 'A' shares in KLM as well as the state option remains in place to guarantee and safeguard KLM's nationality in the current aero-political environment." 2.24 10. MCU (English) SPINETTA, SAYING: "Alitalia is not ready to go in the train, not in the aircraft at the first stage. Maybe it will go in the train at the second stage and it will have to be decided altogether, Alitalia, Air France KLM, KLM and Air France. That's very clear." 2.43 11. SV JEAN-CYRIL SPINETTA (WITH GLASSES ON LEFT OF FRAME) STANDING AND SHAKING HANDS WITH LEO VAN WIJK 2.52 12. SV OF FLIGHT ATTENDANTS (LIGHT BLUE KLM) POSING FOR PHOTOGRAPHS WITH VAN WIJK AND SPINETTA (2 SHOTS) 3.06 (W4) SCHIPOL AIRPORT, THE NETHERLANDS (RECENT) (REUTERS - ACCESS ALL) 13. LV OF KLM AIRCRAFT 3.11 14. LV/SV AIR FRANCE AIRCRAFT ON TARMAC PASSING KLM AIRCRAFT (2 SHOTS) 3.21 15. KLM ARICRAFT ON TARMAC 3.30 16. LV AIR FRANCE AIRCRAFT PASSING KLM AIRCRAFT 3.41 (W5) GRAPHIC (REUTERS - ACCESS ALL) 17. GRAPHIC SHOWING KLM/AIR FRANCE DEAL AS CREATING THIRD LARGEST 3.54 Initials Script is copyright Reuters Limited. All rights reserved
- Embargoed: 15th October 2003 13:00
- Keywords:
- Location: SCHIPOL, NEAR AMSTERDAM, THE NETHERLANDS
- Country: Netherlands
- Reuters ID: LVA1Z0CZSPQ1098S3PD6X6N4M2DX
- Story Text: Air France and KLM have unveiled plans 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 percent but Air
France stock slid seven percent after Europe's second and
fourth-ranked airlines revealed alliance proposals approved
by their boards late on Monday after almost two years of
talks.
Speaking at a news conference on Tuesday (September 30)
Jean-Cyril Spinetta, chairman of Air France, said, "Today
we, Air France and KLM, two major flag carriers, have
decided to combine our strengths and create Europe's first
airline group. An operation like this brings many
challenges while taking the interests of our shareholders
into account we must comply with current regulations,
harmonise two very strong corporate cultures and give solid
assurances regarding the future development of the two
companies."
The deal would value the share capital of KLM at 784
million euros, representing a 40 percent premium over its
closing share price on September 29.
Spinetta said, "We propose that KLM's shareholders
receive 11 Air France shares in exchange for 10 KLM shares.
These Air France shares will come from a new share issue
reserved for KLM shareholders."
Current KLM shareholders would own 19 percent of the
enlarged company, while the French state would see its
st
ake fall to 44 percent from its current 54 percent. Other
Air France shareholders would own the remaining 37 percent.
Spinetta forecast 600 million euros in annual long-term
merger benefits and said no lay-offs were planned.
KLM's Chief Leo Van Wijk said, "In order to protect
KLM's nationality, for the time being only 49 per cent of
the economic interest will have voting rights associated to
it in KLM, which consequently means that 51 per cent will
be managed through a number of vehicles, two foundations,
the Dutch state will continue to have it's voting rights
through the preferred 'A' shares in KLM as well as the
state option remains in place to guarantee and safeguard
KLM's nationality in the current aero-political
environment."
Some analysts said the 40-percent premium Air France
would offer for KLM in the stock deal 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.
A successful Air France/KLM combination could serve as
a model for other full-service airlines struggling with an
economic slowdown and growing competition from no-frills
carriers in an already overcrowded market.
Aviation industry mergers have proved elusive in the
past, partly because of bilateral agreements between
governments which dictate which airlines can fly where on
international routes.
Once such rules are modified, analysts say, the sector
will be able to consolidate and tackle the over-capacity
which has made many carriers unprofitable in recent years.
Spinetta, who will head the merged Air France-KLM, said
the two airlines had signed a trilateral accord with
Alitalia, which would allow the Italian carrier to
cooperate with the new entity but he said that this would
not happen yet.
"Alitalia is not ready to go in the train, not in the
aircraft! at the first stage," said Spinetta, adding,
"Maybe it will go in the train at the second stage and it
will have to be decided altogether, Alitalia, Air France
KLM, KLM and Air france. That's very clear."
Alitalia said in a separate statement that it would
begin talks with Air France on joining the combination.
Even without Alitalia, a merged Air France-KLM would
take over from BA as Europe's largest airline in terms of
traffic and become the world's third-largest behind
American and Delta.
Many governments, which had once seen the existence of
flag carriers as a matter of national pride, now recognise
the need for consolidation.
The tie-up would bring KLM into the SkyTeam alliance,
led by Air France and Delta, and is likely to lure KLM's
U.S. partners, Northwest and Continental, at a later date.
That would make SkyTeam bigger than the oneworld
alliance led by British Airways and American Airlines and
narrow the gap between SkyTeam and the top-ranked Star
Alliance grouping led by Lufthansa and United Airlines.
Both airlines will safeguard their national identities,
logos and brands. Air France also gave assurances to the
Dutch government that Schiphol airport in Amsterdam would
become its second hub and be developed on equal terms with
its Roissy Charles de Gaulle base near Paris.
The Dutch government and other Dutch entities will hold
51 percent of KLM's voting rights for three years to
protect KLM's international landing rights.
Air France and KLM estimated that merger benefits would
build up over time in areas including sales and
distribut
ion, network and fleet management, maintenance and
information technology.
They forecast an annual improvement in combined
operating income of 385 million to 495 million euros after
five years, with 60 percent of total synergies coming from
cost savings.
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