kl911
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EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 9:45 am

I thought CSA was doing better now after getting rid of loss making routes. How is the status now? And why allow state aid, I thought that wouldn't happen anymore?

Quote:

"The EU Commission this week gave approval for 100 million euros in state aid to be granted to state-owned Czech Airlines, within a restructuring programme which the regulator said had a reasonable prospect of getting the airline back on track."

source: http://www.reuters.com/article/2012/...-airlines-eu-idUSL5E8KJ8WC20120919
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 11:56 am

The European Union does allow for subventions in case a company is too important for a country and that if it would fail it would cause chaos in the country.
The fact that they have allowed this state aid to be grandted to CSA just goes to prove that the decision in relation to Malev was a joke.
 
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pvjin
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 1:21 pm

Good thing, I would love to see more aid given to proper airlines instead of FR becoming the only real option in many airports.
"Optimism is the madness of insisting that all is well when we are miserable." - Voltaire
 
bueb0g
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 1:54 pm

Quoting kl911 (Thread starter):
And why allow state aid, I thought that wouldn't happen anymore?
Quoting kl911 (Thread starter):
l for 100 million euros in state aid to be granted to state-owned Czech Airlines

It's state owned, as you quoted there. Bailouts won't be given to private companies but there's nothing anybody can do to stop a government giving money to an entity it owns.

Quoting ju068 (Reply 3):
The fact that they have allowed this state aid to be grandted to CSA just goes to prove that the decision in relation to Malev was a joke.

Malev was a private company, CSA is state owned. The comparisons you're making are therefore moot.
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Akiestar
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 2:10 pm

Quoting bueb0g (Reply 5):
Bailouts won't be given to private companies but there's nothing anybody can do to stop a government giving money to an entity it owns.

I thought the EU stopped the Greeks from subsidizing OA?  

Quoting bueb0g (Reply 5):
Malev was a private company

MA was renationalized in 2010. But as far as I know, it was the renationalization which became the subject of the EU declaring the Hungarian government's "subsidies" to MA illegal.
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 2:23 pm

Quoting bueb0g (Reply 5):
Malev was a private company, CSA is state owned. The comparisons you're making are therefore moot.

Not true, Malev was initially privatized and then renationalized after it was severely mismanaged. The cash injection by the Hungarian government was in line with the Lisbon Treaty, since subsidies after mismanagement are allowed.
 
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Aesma
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 3:29 pm

Quoting bueb0g (Reply 5):
It's state owned, as you quoted there. Bailouts won't be given to private companies but there's nothing anybody can do to stop a government giving money to an entity it owns.

EU rules certainly apply to public companies, in fact it's the reason why public companies like utilities and railways are privatized to begin with (in France anyway, in other countries it's political will).
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 3:49 pm

But does anyone know if the CSA situation is that bad that they need a cash injection of 100 million right after the summer, with winter still coming? What does this mean for their future?

Quoting pvjin (Reply 2):
Good thing, I would love to see more aid given to proper airlines instead of FR becoming the only real option in many airports.

Well, If CSA would go under FR would never become the only option at PRG. Look at BUD, most other countries airlines just increased capacity, and the lowcost pie was shared between Wizzair ( already at PRG too ) and Ryanair. To a lesser extend also Easyjet, Norwegian, Germanwings, Air Berlin, Transavia. etc etc.

Btw, FR would never want fly to AMS, CDG, LHR etc etc. They aim for a different ( bottom of leisure market.)
 
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BasilFawlty
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:13 pm

Quoting ju068 (Reply 1):
The European Union does allow for subventions in case a company is too important for a country and that if it would fail it would cause chaos in the country.

Maybe it's just me but I don't see why CSA is so important that state aid is justified? The majority of their routes are also flown by other airlines, so in case CSA would go bust there won't be chaos in my opinion.
'Every year donkeys and mules kill more people than plane crashes'
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:15 pm

Quoting BasilFawlty (Reply 8):

It is not only about linking Prague with other cities but it has to do with the number of jobs CSA provides and what its roles is within the Czech economy.
 
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BasilFawlty
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:22 pm

Quoting ju068 (Reply 9):
It is not only about linking Prague with other cities but it has to do with the number of jobs CSA provides and what its roles is within the Czech economy.

So around 4500-5000 job losses on a population of 10.5 million would create chaos?   Most of the CSA employees will find new jobs because if CSA goes bust I'm quite sure that Wizz Air and Smart Wings/Travel Service will expand their operations and I wouldn't rule out a new base of FR or EZY either.
'Every year donkeys and mules kill more people than plane crashes'
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:22 pm

Quoting BasilFawlty (Reply 8):
Maybe it's just me but I don't see why CSA is so important that state aid is justified?

They are not. Actually, they are dropping routes all over the place, Helsinki its latest victim, other examples were Athens, Tel Aviv, Sofia, Baku and all Intercontinental routes.
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:25 pm

Quoting BasilFawlty (Reply 10):
So around 4500-5000 job losses on a population of 10.5 million would create chaos? Most of the CSA employees will find new jobs because if CSA goes bust I'm quite sure that Wizz Air and Smart Wings/Travel Service will expand their operations and I wouldn't rule out a new base of FR or EZY either.

FR opening a base is a given, and Wizzair will follow immediately. Have a look at the Ryanair routemap from example Stansted. There is one large gap in Europe and Prague is right in the middle.
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:29 pm

Quoting BasilFawlty (Reply 10):

Well, CSA also provides jobs indirectly to smaller companies. I am sure that there the Czech government has more insight than both of us and that they know why they can't afford to lose it.

Quoting kl911 (Reply 11):
other examples were Athens, Tel Aviv, Sofia, Baku and all Intercontinental routes.

If I remember correctly they got the keep Tel Aviv. The only reason they were suspending the route was because the rights were granted to Travel Service.
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 4:41 pm

Quoting ju068 (Reply 13):
Well, CSA also provides jobs indirectly to smaller companies.

Any other airline starting a base there would need those smaller companies, from catering, transport, shops to maintenance.
 
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pu
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 5:07 pm

Quoting BasilFawlty (Reply 8):
Maybe it's just me but I don't see why CSA is so important that state aid is justified?

Airlines are highly visible and a matter of national pride. All the important-respectable nations have their own, therefore if a country loses theirs, it kind of says they are less relevant (and subservient to other countries for air service).

Quoting ju068 (Reply 9):
number of jobs

I am sure that is part of the political-economic argument to the EU and Czech people. But if jobs are a concern I would tell Volkswagen or Apple they can have 100 million euros free of charge to build a new factory in suburban Prague, perhaps on the old CSA properties. Much better use of any free money the Czech government is giving away.

Pu
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 5:46 pm

Quoting pu (Reply 15):
Airlines are highly visible and a matter of national pride. All the important-respectable nations have their own, therefore if a country loses theirs, it kind of says they are less relevant (and subservient to other countries for air service).

Not really, KLM is French, Brussels Airlines, Swiss and Austrian are German, and Iberia is British.  
 
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Aesma
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 6:45 pm

I'd say you just proved his point. The Dutch want to have an airline looking Dutch even if in reality it's French.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 6:57 pm

Quoting Aesma (Reply 17):
. The Dutch want to have an airline looking Dutch even if in reality it's French

Trust me, we couldnt care less. Lowest fare, frequency and or journey time are important in choosing an airline, not national pride. In Holland we are actually very Pro EU. ( Yes, I am Dutch. )
 
gr09
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 7:22 pm

I think this is a misunderstanding. The EUR100 million is an old state subvention that had taken account in 2009. EU has just legalized it now.

Quoting kl911 (Reply 18):
Yes, I am Dutch

Why do you use a Hungarian flag then? Maybe I'm mistaken but I thought the flags are per nationality.



[Edited 2012-09-22 12:26:23]
 
AirGAbon
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 7:40 pm

Quoting kl911 (Reply 16):
Not really, KLM is French

KLM is not French, it's part of the holding AF-KL based in Amsterdam under Dutch laws.
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 8:02 pm

Quoting gr09 (Reply 19):
Why do you use a Hungarian flag then? Maybe I'm mistaken but I thought the flags are per nationality.

Well, I noticed a lot do it to point out where they live and work. So did I.
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 8:38 pm

Quoting kl911 (Reply 18):
Trust me, we couldnt care less. Lowest fare, frequency and or journey time are important in choosing an airline, not national pride

Maybe you can speak for yourself, I have a lot of Dutch friends and they are all very proud to have KLM, they epecially love the ''Flying Dutchman'' on the side of the planes.
 
pesit4a
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 8:52 pm

Quoting ju068 (Reply 22):

I must agree with you! Having lived in NL, most Dutch people are very protective of KLM's Dutch heritage.

KLM is Holland's Glorie!
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brilondon
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 10:07 pm

Quoting Aesma (Reply 17):

I'd say you just proved his point. The Dutch want to have an airline looking Dutch even if in reality it's French.

As far as I know KL is still a Dutch owned company and the Dutch are very proud of their airline.
Rush for ever; Yankees all the way!!
 
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pu
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RE: EU Approves New State Aid For Czech Airlines

Sat Sep 22, 2012 10:46 pm

Quoting pesit4a (Reply 23):
Quoting brilondon (Reply 24):

I for one rest easier knowing no matter how tedious things get, Amsterdam is only a nonstop flight away from reality. (for most cities in the world I find myself)
 
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MillwallSean
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 2:37 am

Czech has received the green light to provide aid to its airline because it has proven that the aid is in line with EU law. They have then applied, had its businesscase considered and its been deemed viable.
Well done to Czech for that. I hope they have a decent foundation now to build upon. That they follow the example of Alitalia and improve and creates a more viable businessrather than the example of other airlines that has run out of oppurtunities because of a lack of viable business plan.

EU legislation is very clear and very simple in regards to state aid.
Under EU State aid rules, interventions by public authorities in companies carrying out economic activities can be considered free of aid if they are made on terms that a private player operating under market conditions would have accepted (the so called "market economy investor principle").

or

A company in difficulty may receive state aid under the strict conditions set in the 2004 EU Rescue and Restructuring Guidelines (see IP/04/856, MEMO/04/172). it then needs to demonstrate how it would become viable again under its current/adapted business model. It will also ensure that state aid is not a continious measure and that with the aid it can function and ensure a fair market for the forseeable future.

Here is a good site for those that want to read more about the facts in regards to state aid and the EU.
http://ec.europa.eu/competition/state_aid/overview/index_en.html

I wonder why the Malev issue is brought up so many times when it fails to acheive any of the two points set out in the EU legislation.

Just to explain where Malev stood on the two points;
A. The Commission's investigation concluded that Malév, given its consistently difficult financial situation, would have been unable to secure such financing on the market on the terms conceded by Hungary nor possibly any financing at all.

B. Malév could not demonstrate how it would become viable again under its current business model. Malév's business plan contained no evidence that a private source would be contributing to the cost of restructuring and the plan contained no compensatory measures to minimise the competition distortions brought about by the significant state support.
Moreover, Malév had already repeatedly received state support over the last few years.

Thus verdict decline the request for further state aid. (The key with Malev was of course that the aid given between 2007-2010 was deemed in breach of this as well forcing the Hungarian government to recover the money paid to the airline that was deemed in breach of EU legislation.)
Clear and simple. (even though those affected didnt like it)

In Alitalia case the changes to EU legislation worked. (for now at least). They and the italian government knew that no more aid could be given thus the pressure to change/adapt became so great we saw the merger with Air One and a new carrier, professional/service minded and run as a company not a welfare for nieces and nephews etc came about. Alitalia is now as good as any European peer and judging by my last trip even better/ nicer than most.

The 2004 directive on state aid changed how governments could act on the common market. After it was implemented in the EU we have seen a large change in how states can assist airling companies or government owned entities.
No One Likes Us - We Dont Care.
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 6:11 am

Quoting MillwallSean (Reply 26):
A. The Commission's investigation concluded that Malév, given its consistently difficult financial situation, would have been unable to secure such financing on the market on the terms conceded by Hungary nor possibly any financing at all.

Yes, but the main problem for Malev was its fleet (a deal signed by the current CEO of Wizz Air). The deal was totally crazy with unrealistic demands from the airline, on top of very expensive leasing costs. These two combined have disabled the airline from ever coming close to a profit.
Now, had the European Commission looked closer into the case they would have noticed that this detrimental deal was expiring only a year after its verdict. They could have approved one set of financial aid (which would be in accordance with EU legislation) so as to keep the airline alive until the moment it could sign a new, more favorable deal with a leasing company.

Quoting MillwallSean (Reply 26):
The key with Malev was of course that the aid given between 2007-2010 was deemed in breach of this as well forcing the Hungarian government to recover the money paid to the airline that was deemed in breach of EU legislation.)

Funny thing is that the European Commission breached the Lisbon Treaty, that is Article 108, which states that the Commission in cooperation with Member States, keep under constant review all systems of aid existing in those States. So where was the Commission in the period 2007-2010? According to the 'constitution' of the European Union they should have reviewed all these grants Malev received.
On top of it all the Lisbon Treaty states that the Commission shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market. As we are all aware the European Commission had not done such a thing.


On top of it all, it was the duty of the European Commission to propose to the Hungarian government to approach the Council with a proposal to justify state subsidies for Malev. Malev's importance for the Hungarian government and for the country was repeated countless times. There is a document called ''White Paper on Malev'' which explains it all.

These are just a few examples of where the Commission was wrong. There are at least 5 articles within the Lisbon Treaty which I could use to justify why it was illegal to make that verdict.
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 9:08 am

Quoting MillwallSean (Reply 26):
Czech has received the green light to provide aid to its airline because it has proven that the aid is in line with EU law. They have then applied, had its businesscase considered and its been deemed viable.
Well done to Czech for that. I hope they have a decent foundation now to build upon

Very true, but what worries me is the timing. Normally the summer season is the moneymaker, to have a buffer for the weak winter period. I dont see that here. Having to ask for aid before the winter is IMO not a good sign.
 
gr09
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 10:37 am

I think my post got overlooked. This is not about any new subvention that CSA/state would apply for. This is about subvention from 2009 that state had made and then EU started investigating whether was is legal or not. We all know it was not but EU just let it go this time...

[Edited 2012-09-23 03:37:43]
 
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MillwallSean
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 10:40 am

Quoting KL911 (Reply 28):
Very true, but what worries me is the timing. Normally the summer season is the moneymaker, to have a buffer for the weak winter period. I don't see that here. Having to ask for aid before the winter is IMO not a good sign.

I agree with you. Czech isn't in great shape. However the state aid should allow it to stabilise and get through the winter without issues. Question is if we afterwards see an upswing in accordance to the business model or if the overheads are to large.
Ive always enjoyed Czech so I hope they manage to survive and take advantage of the money they have now received. I also like that Czech has taken so many hard decisions, shut down many routes and really made an effort. I hope that will pay off for them.

Quoting ju068 (Reply 27):
These are just a few examples of where the Commission was wrong. There are at least 5 articles within the Lisbon Treaty which I could use to justify why it was illegal to make that verdict.

If you posses such knowledge that you can find five places in the Lisbon treaty that the European Commissions experts on state aid have misinterpreted. Why not make your points heard with the relevant authorities?
Here is a link to the right place
http://europa.eu/about-eu/institutio...-bodies/court-justice/index_en.htm
Even better there are no fees here, and if you lack means you can apply for free legal assistance.
No One Likes Us - We Dont Care.
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 12:19 pm

Quoting MillwallSean (Reply 30):
If you posses such knowledge that you can find five places in the Lisbon treaty that the European Commissions experts on state aid have misinterpreted. Why not make your points heard with the relevant authorities?
Here is a link to the right place
http://europa.eu/about-eu/institutio...-bodies/court-justice/index_en.htm
Even better there are no fees here, and if you lack means you can apply for free legal assistance.

Well I work for the European Parliament so no need to help me, especially not when you are wrong, again.

If I really wanted to do something about all this I could have just contacted the office of Mr Diamandouros, since we work with them on a daily basis. But thanks for your efforts, they are appreciated.
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 12:32 pm

Quoting ju068 (Reply 31):
Well I work for the European Parliament

Since when is Serbia in the EU?  
Quoting MillwallSean (Reply 30):
Ive always enjoyed Czech so I hope they manage to survive

Me too, my wife is Czech.   But I also want more LCC options to PRG. Just 8 Wizzair and 6 Easyjet routes doesnt do it for me. And Smartwings is too expensive and unreliable.
 
JU068
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 12:50 pm

Quoting KL911 (Reply 32):
Since when is Serbia in the EU?

Serbia is not in the European Union, I have a dual citizenship. But there are posts open for non-EU people at the European Parliament, just those jobs are without prospect.
 
Asturias
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 1:29 pm

Quoting pvjin (Reply 2):
Good thing, I would love to see more aid given to proper airlines instead of FR becoming the only real option in many airports.

  

Ironically, FR is heavily government subisidised so it's only fair that real airlines get some of that as well.

Quoting kl911 (Reply 16):
Not really, KLM is French, Brussels Airlines, Swiss and Austrian are German, and Iberia is British.  

Not really, Iberia is based in Madrid, the holding company (IAG) has its registered office in Madrid and the largest shareholder of said holding company is Spanish.
Tonight we fly
 
kl911
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 2:48 pm

Quoting Asturias (Reply 34):
Ironically, FR is heavily government subisidised so it's only fair that real airlines get some of that as well.

A typical answer from you.

There is a diference between state aid given ( legal or illegal) to cover losses ( as is the case now with OK, and Iberia in the past ) and subsidy being given by a certain airport or region which benefits the tax payer at the end by creating jobs and receiving tourist income.. ( See thread about subsidy given by BWI to BA )

Ryanair has only received subsidy from ( often private )airports and local regions which were available for all other airlines meeting the criteria. Ryanair has NEVER received state aid, as others like your favourite Iberia did.
 
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Aesma
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 4:02 pm

From a 2012 pdf of the group :

AIR FRANCE-KLM
A French limited liability company (société anonyme) with capital of 300 219 278 euros
Registered office: 2, rue Robert Esnault Pelterie, 75007 Paris.

I would also point out that the French state owns 19% of the group.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
Viscount724
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RE: EU Approves New State Aid For Czech Airlines

Sun Sep 23, 2012 8:22 pm

Quoting kl911 (Reply 16):
Quoting pu (Reply 15):
Airlines are highly visible and a matter of national pride. All the important-respectable nations have their own, therefore if a country loses theirs, it kind of says they are less relevant (and subservient to other countries for air service).

Not really, KLM is French, Brussels Airlines, Swiss and Austrian are German, and Iberia is British.

Few people think of KL as French. In fact I would guess that a high percentage of KL passengers have no idea that KL is even related to AF. The same applies for SN/LX/OS and LH.