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Aviation History
2003
2003 - 2173.PDF
ULL LIST OF ADVERTISER EDITORIAL +44 (20) 8652 3842 Quadrant House, The Quadrant, Sutton, Surrey SM2 5AS, UK Fax +44 (20) 8652 3840 email fligMMternstionalHirbi.co.uk Editor Murdo Morrison +44 (20) 8652 4395 murdo.morrison@rbi.co.uk Editorial Assistant Andrew Costerton +44 (20) 8652 3835 mdreif.costerton9rbi.co.uk News Editor Andrew Doyle +44 (20) 8652 3096 andrew.doyle@rbi.co.uk Commercial Aviation Editor Max Kingsley-Jones +44 (20) 8652 3825 max.kingsley.jones@rbi.co.uk Operations/Safety Editor David Learmount +44 (20) 8652 3845 david.learmount@rbi.co.uk Business Editor Alexander Campbell +44 (20) 8652 3990 alexander.campbeil@rbi.C0Mk Business & General Aviation Editor Kate Sarsfield +44 (20) 8652 3885 kate.sarsfield@rbi.co.uk Senior Reporter Justin Wastage +44 (20) 8652 3863 justin.mstnage@rbi.co.uk Technical Reporter Michael Phelan +44 (20) 8652 3843 michael.pbelan@rbi.co.uk Spacefliqht Correspondent Tim Furniss •44 (1237) 471960 tim@spaceport.co.uk Senior Technical Artist Giuseppe Picarella +44 (20) 8652 W54joe.picarella@rbi.co.uk Editorial Artist Tim Brown +44 (20) 8652 8043 tim.brown@rbi.co.uk EUROPE/MIDDLE EAST European Editor Christina Mackenzie +33 (1) 64 23 68 89 christina.mackenzie@rbi.co.uk Israel Correspondent Arie Eqozi +972 (3) 9413132 Middle East Correspondent Gerald Butt +357 22 665 431 Fax +357 22 671988 gbutt@spidernet.com.cy christina.mackenzie@rbi.co.uk AMERICAS Washington DC Office Fax +1 (703) 836 8344 Americas Editor Graham Warwick +1 (703) 836 3448 graham.warwick@rbi.co.uk East Coast Editor Stephen Trimble +1 (703) 836 3084 stephen.trimbte@rbi.co.uk West Coast Editor Guy Norris +1 (949) 252 8971 Fax +1 (949) 252 8972 guy.norris@rbi.co.uk Brazil Correspondent Jackson FEores Jr +55 212439-6062 Fax +55 212349-6090 fubar@uot.com.br Canada Correspondent Brian Dunn ASIA/PACIFIC Singapore Office Fax +65 6789 7575 Regional Managing Editor Nicholas lonides +65 6780 4311 nicholas.ionides@rbi.co.uk Deputy Asia Editor Brendan Sobie +65 6780 4309 brendan.sobie@rbi.co.uk Regional Reporter Leithen Francis +65 6780 4314 leithen.francis@rbi.co.uk Australia Civil Aviation Correspondent Emma Kelly +61 (8) 9454 4987 emmajkeiiy@bigpond.com Associate Editor (Defence) Peter La Franchi +61419 246 620 Fax +61 (2) 62312795 nulka@ozemail.com.au EDITORIAL PRODUCTION Group Production Editor Graeme Osborn +44 (20) 8652 3828 Group Art Editor James Mason +44 (20) 8652 4994 Chief Sub-Editor Chris Thornton +44 (20) 8652 4997 Deputy Production Editor Jackie Thompson +44 (20) 8652 3850 Sub Editor Megan Turner +44 (20) 8652 3848 Photographer Mark Wagner +44 (20) 8944 5225 WWW.FLI6HTINTERNATI0NAL.COM Webmaster Sheena Buchanan +44 (20) 8652 4432 SUBSCRIPTIONS +44 (1444) 445454 rbi.subscriptions@rbi.co.uk THE FLIGHT COLLECTION kim.hearn@rbi.co.uk © and Database Rights 2003 Reed Business Information Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission in writing of the publishers J". m\ f Air Transport Intelligence (ATI), Flight International's sister online service at www.rati.com, contains the full text of Flight i International and Airline Business since 1996. Full text of the magazines can also be found online with Lexis-Nexis, Dialogue, FT Profile, IAC and Reuters. Editor Kieran Daly +44 (20) 8652 3837 Reed Business Information COMMENT Wishful thinking? The Air France-KLM planned tie-up is not as straightforward as it seems: bilateral and control issues are high among problems still to be resolved The plans for a merger between Air France and KLM have received blanket coverage around the world - but there is almost cer tainly less importance to the news than the column inches would suggest. The obstacles that remain in the airlines' path mean that any real changes, in as far as passengers and the wider industry are concerned, remain far off and extremely uncertain, with a lot of work still to be done. First, and most obviously, there is the bilat eral issue. Should KLM take the plunge and merge with Air France tomorrow, it would auto matically lose its international flying rights. There is no way around this: KLM's flying rights, just like those of most other airlines, depend on it remaining majority-owned by citi zens of its country of registration. No clever structure of holding companies or joint operat ing committees will obviate this. The two airlines know this, and therefore Obstacles in the airlines' path mean any real changes remain far off under the merger plan, KLM and Air France will operate separately under a joint strategic com mittee, whose responsibilities are yet to be fully defined. This does not get round the ownership requirement, therefore the majority of KLM's voting rights will stay with Dutch investors and the Dutch government for three years. This will allow KLM to keep its flying rights, but raises the question of what, exactly, will the airlines get out of a merger that leaves the two airlines operating separately and controlled by different people? Is such a deal actually a merger in any real sense? True, the airline landscape is changing: last year saw the European Court of Justice give the European Commission power to negotiate a new US-European aviation treaty, which would treat all European Union airlines alike, and negotiations began last week. Such a deal would allow mergers between EU airlines without the loss of their US flying rights. It would also open up US carriers to increased domestic competition, unwelcome both to an industry still trying to recover from its worst- ever downturn and an administration whose belief in the value of free trade and interna tional goodwill has been questioned. Believing, as Air France and KLM seem to, that the Commission can push a deal like this through in three years, is a feat of optimism of "over by Christmas" proportions. Six years seems a more realistic timescale, and there is still a chance that it will not happen at all. The final shape of the deal is still uncertain: US negotiators are believed to favour an extension of existing open-skies deals to cover the rest of the EU nations, an outcome which the Europeans believe would give the USA an unfair advantage. This aside, merging two airlines is never simple. Air Canada suffered for months after taking over Canadian Airlines. Even EasyJet's takeover of Go, a virtually identical airline with only four years of independent existence, has been less than straightforward. KLM is one of the oldest independent airlines in the world. The cultural barriers go beyond speaking dif ferent languages and operating under different laws. This will not be an easy union to achieve. It is clear that employees on both sides sides of the proposed merger-particularly those of KLM, the junior partner - are now starting to worry about exactly where the promised €495 million ($567 million) cost sav ings will come from. Headquarters and maintenance divisions seem to be the obvious areas - and as both Air France and KLM have employee representation in their manage ment, and in the proposed joint board, this could be a significant problem. Northwest's status, too, remains in doubt: how long can it maintain its relationship with KLM once KLM enters the rival SkyTeam alliance? Furthermore the French competition authorities (unlike their Dutch counterparts) have so far not indicated whether they are minded to approve the tie-up. Airline consolidation is a good idea, and overdue on both sides of the Atlantic. But it is difficult to see how the Air France/KLM tie-up is going to contribute to this worthy goal in the near future. Any significant progress must await the signing of a new EU-US aviation agreement, and there is little that European airlines can do to accelerate this process that they are not (presumably) doing already. Even three years from now, with the effects of the current recession and aviation crisis long past, it is difficult to imagine the US government rushing to open up its domestic market - in which network carriers are already losing out to low-cost competition - to an influx of new foreign entrants. SEE AIR TRANSPORT P12 www.flightinternational.com FLIGHT INTERNATIONAL 7-13 OCTOBER 2003 3
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