Doug Cameron

Alitalia can breathe a sigh of relief after securing KLM as a European partner, as KLMlooks forward to its network being boosted.

Alitalia rejected Swissair and Air France as possible partners and signed a memorandum of understanding for a broad-based alliance with KLMon 18 December. For KLM, the deal is a crucial building block in creating critical mass in Europe to feed its longhaul network. The pair account for 12 per cent of intra-European passengers and aim to grow this to 18 per cent.

The focus of the one-year agreement is to create a complementary network based on the carriers' designated hubs at Amsterdam/Schiphol, Rome/Fiumicino and Milan/Malpensa. Rome has been identified as a base for Mediterranean services and KLM is examining the transfer of Middle East and Asian services based on codeshares through Schiphol. Schiphol will remain the base for services to the Americas, though Alitalia says it has no plans to end its codeshare deal with Continental on Italy-US flights.

KLM believes the European deal could hasten negotiations to combine the transatlantic services of Continental and its USpartner Northwest. Northwest is keen to pool transatlantic resources to recognise the Alitalia deal.

The KLM deal could pose problems, however, for the planned reduction of state holding company, IRI's, stake in Alitalia from 89 per cent to 40 per cent later this year. IRI now looks set to be limited to an institutional and retail offer, as the possibility of a strategic airline investor is reduced by KLM's betrothal to Alitalia. KLMhas confirmed it will not buy into Alitalia.

Source: Airline Business