The Air France-KLM Group, the world's largest commercial aviation company measured in passenger revenues, today reported strong financial numbers for its fiscal year ended March 31. The merged entity said net profits rose 20 percent to €351 million (US$445 million). These results are encouraging for other companies considering cross-border consolidation in the global airline industry.
"The first year of the merger between Air France and KLM has been a complete success," proclaimed chairman and CEO Jean-Cyril Spinetta yesterday during the company's board meeting.
Spinetta said synergies achieved from the integration totaled €115 million (US$146 million), well ahead of initial forecasts. Traffic growth of 9 percent outpaced capacity growth of 7 percent, pushing overall passenger load factor up to 78.7
Air France-KLM officially was formed last May through a complicated transaction that kept intact the separate identities and traffic rights of the legacy airlines
(BTNonline, May 4, 2004). Within a few months, the combined company accomplished various integration tasks, including an amalgamated sales platform that paved the way for more comprehensive multinational corporate programs
(BTN, June 7).
Today, Air France-KLM reported total 2004-2005 passenger revenues of €14.1 billion (US$17.9 billion), 7 percent higher than a year earlier and well ahead of any global competitor. Its annual traffic and capacity levels are surpassed only by the three largest U.S. carriers: American, Delta and United. The group plans to grow capacity another 5 percent during the current fiscal year, with particular emphasis on transatlantic services.
With European airline industry consolidation underway, Lufthansa German Airlines and Swiss International Air Lines are pursuing their own cross-border merger, roughly modeled on the Air France-KLM structure
(BTN, April 18).
Stateside, large-scale airline mergers have been difficult to accomplish following American Airlines' purchase of Trans World Airlines in early 2001
(BTN, April 9, 2001). America West Airlines and US Airways, however, soon may break the four-year lull in domestic M&A. The two companies are said to be preparing to announce as early as today plans to combine operations.