Günter Endres/LONDON The sale of Air Liberté finally ends a disastrous excursion into the French market by British Airways which began eight years ago with the acquisition of TAT. Now another group will attempt to merge France's second airlines into a credible force.

BA picked up Air Liberté from near bankruptcy four years ago and began to force a merger with TAT in the hope of reversing the fortunes of both loss-making operations. The merger eventually happened, but failed to stem losses, and BA has now sold its 86% stake in the business to Taitbout Antibes, a unit of Groupe Alpha and Wendel Marine.

Groupe Alpha already holds stakes in competitor AOM French Airlines and regional carrier Air Littoral, both of which also have 49% holdings by the SAirGroup. BA received Fr457 million ($63 million) from the sale, but that is scant recompense for losses of around $750 million from its French campaign.

Groupe Alpha's president Alain Blanc-Brude believes that the new owner can create a merged second force in the French market where BA failed. Profits are not expected until 2001, however, as the restructuring takes place, pulling all three airlines under a single brand. Last year Air Liberté lost Fr240 million, while AOM sank to losses of Fr100 million.

Because of the involvement of Swissair parent SAir, which is not a European Union airline group, the initial merger of AOM with Air Liberté will have to be approved by the European Commission, but this is unlikely to run into difficulties.

A management structure has already been set up, under which AOM's Alexandre Couvelaire has taken over the day-to-day running of the two airlines under the chairmanship of Blanc-Brude. The next step would be to integrate Air Littoral, although the complex shareholding structure of the combined operation has yet to be fully worked out with the SAirGroup. As of now, says Blanc-Brude, the three airlines "will behave as one company, with the aim to simplify the structure".

With 3-4% of staff leaving voluntarily each year and several on short-term contracts, Blanc-Brude believes any rationalisation can be achieved without compulsory redundancies. There will have to be some relocation to reduce duplication.

The merger is designed to generate the critical mass, which the individual airlines lacked, and provide an effective "second force" in the French market to flag carrier Air France. With combined annual revenues of Fr10 billion ($1.4 billion) and 10 million passengers, the new airline will have a 30-35% domestic market share. Blanc-Brude says, however, that "we will not fight with Air France for more market share, we will fight to boost yields and to add destinations and frequencies to meet our customers' demands".

Operations will focus on Paris Orly, where it has 30% of slots, and the southern hub of Nice. Overlaps will be reduced and domestic schedules harmonised, while on long-haul flights the new airline will work more closely with Swissair to develop synergies and a longer-term strategy.

As for the fleet, the ageing McDonnell Douglas DC-10s, operated by Air Liberté and AOM, will be replaced by an Airbus type, while the short-haul fleet will be standardised on the Fokker 100, at least until a fleet renewal with Airbus A320s, planned by BA and, according to Blanc-Brude, to be followed through by the new owner. The Swissair facilities will be used for all fleet maintenance.

Since the incorporation of Air Inter, independent domestic competition to Air France has been disjointed and never reached sufficient critical mass to cause the national carrier too much distress. But the situation has changed radically and the market is divided more fairly.

Source: Airline Business