Air France-KLM: A merger that works?

Three years after cementing its merger, Air France-KLM today boasted a 32.5% year-over-year increase in operating profits and increased its return on capital employed target for the next three years to 8.5% from 6.5% last year.

The group is showing signs of confidence that its merger is paying off, and says its first joint cost savings programme, ‘Challenge 10′, will lead to a 3% reduction in unit costs over the next three years, most of which will come from productivity improvements.Early criticisms of the Air France-KLM merger suggested that it was an unlikely pairing which would have to prove its worth.

But with their margins having more than doubled since the two carriers merged, and a commitment to deliver €1 billion in synergies, perhaps the story bodes well for further consolidation in the European airline industry in the future.

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