KLM Royal Dutch Airlines has dropped plans to acquire the 50% holding in Dutch operator Martinair that it does not already own. The news comes after KLM failed to reach agreement with the European Commission (EC) over the conditions required to let the deal go ahead.

In the face of an expected formal rejection of the deal from the EC, KLM abandoned the Fl350 million ($170.7 million) purchase of shares from Nedlloyd, its partner in Martinair.

Martinair operates scheduled, charter and cargo flights with Boeing 747s, 767s and MD-11s in passenger and cargo configurations.

Martinair president and chief executive Aad van Bochove says the decision is a "major setback in our efforts to streamline our operations with KLM and Transavia [the Dutch airline owned 80% by KLM]". Although it had failed to win the argument on this occasion KLM suggests it has not entirely given up on the take-over. "Later, under different circumstances, determination on this matter can be carried out easier without a formal rejection from the EC," it says.

EC Competition Commissioner Karel Van Miert says the take-over foundered on the fact that competition in the Dutch leisure market would have been eliminated. There were complaints from the only non-KLM owned charter operator, Air Holland, and from Dutch tour operators, on market dominance. The deal would have given the flag carrier control over 65% of the Dutch charter market to the Mediterranean and 75% of the market to other European markets.

Following the decision, Nedlloyd said it had "the situation under discussion, but sale of Martinair shares to other parties is a non-issue". But Dutch financial analysts forecast that Nedlloyd may be sold to an independent investor, such as the Dutch National Investment Bank, which also owns 20% of Transavia's shares.

Source: Flight International