mplsjefe
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If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 12:42 am

With the, yet again, dreadful earnings reports from AF/KLM I wonder if they both "went under" or were liquidated, would SkyTEAM fall as well. I know they are flag carriers for their respective countries, but how much can you lose before you throw in the towel? DL can't support the trans-Atlantic traffic on its own, even with the new investment in Virgin Atlantic. What other European Airline would DL/SkyTEAM try to woo if AF/KLM did fall? . . . just some thoughts and rhetorical questions.
 
Braniff747SP
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 1:08 am

Quoting mplsjefe (Thread starter):
AF/KLM

First, not going to happen...

Secondly, last I remember, it was AF that was unprofitable--I believe that KL was just fine. I don't see either failing, especially KLM.
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csavel
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 1:20 am

Well perhaps a healthy Delta could buy a healthy KLM so that Air France ne mourrir pas. Sure KLM is profitable but with those losses, time to start divesting to cover them.

Forgive my ignorance, and I don't want to start a flame war, but it seems that Air France is in particular more troubled than other European legacy carriers (that are still around, at least) with the possible exception of Iberia, So what is it? Culture? Wrong route structure? Poor service?
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DeltaMD90
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 1:40 am

Quoting Braniff747SP (Reply 1):
Secondly, last I remember, it was AF that was unprofitable--I believe that KL was just fine. I don't see either failing, especially KLM.
Quoting csavel (Reply 2):
Well perhaps a healthy Delta could buy a healthy KLM so that Air France ne mourrir pas. Sure KLM is profitable but with those losses, time to start divesting to cover them.
Quoting csavel (Reply 2):
So what is it? Culture? Wrong route structure? Poor service?

I heard something not too long ago, but it makes a ton of sense. Not sure if it's true, but very interesting. The jist of it was that AF/KLM shoves as much of the losses on AF as it can because of tax reasons... basically, it is more profitable to do that than have KLM shoulder the burden. Think it has to do with lower taxes in the Netherlands.

Sounds pretty crazy but it makes a lot of sense

And I know OP said that he realizes they are both flag carriers, but I do think this will be the reason they won't fail (for a while) especially if the reasons for failing are because of labor laws or something, not just company mismanagement...
Ironically I have never flown a Delta MD-90 :)
 
Viscount724
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 1:42 am

Quoting csavel (Reply 2):
Forgive my ignorance, and I don't want to start a flame war, but it seems that Air France is in particular more troubled than other European legacy carriers (that are still around, at least) with the possible exception of Iberia, So what is it? Culture? Wrong route structure? Poor service?

It doesn't help that their major home mark, France, the 2nd largest economy in Europe, is in terrible economic shape with record high unemployment and major companies continuing to lay off thousands of workers. And several other major European markets are in even worse condition (Spain, Greece, Portugal, Italy, to name a few). People don't travel when they don't have a job or they're worried about losing their job.
 
Byrdluvs747
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 3:44 am

Quoting csavel (Reply 2):
Well perhaps a healthy Delta could buy a healthy KLM

Due to ownership laws, DL wouldn't be allowed to purchase all of KL. If KL was available for sale, IAG will be there with check in hand.
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anstar
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 4:24 am

Quoting Byrdluvs747 (Reply 5):
Due to ownership laws, DL wouldn't be allowed to purchase all of KL. If KL was available for sale, IAG will be there with check in hand.

BA had the opportunity to purchase KLM, however it went to AF.

BA also were dancing with SWISS but couldn't clinch that deal either.
 
AR385
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 4:36 am

Did Obama let the three big Detroit companies go under? No. So:

1) In the same light, France will never, ever, let Air France be liquidated. Much less with Hollande at the helm of the French government. And

2) Yes, the big losses at AF have more to do with what DeltaMD90 on post 3 said than with them being "real" losses. It´s just a creative way of balancing the books taking advantage of tax arbitraging.

So having written the above, I believe the OP´s question is now moot.

However, if this did happen, well, probably, since I doubt DL would be able to take up the slack.
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 4:56 am

Did DL ever have an opportunity to enter an alliance with BA or LH or -- even though they had experience with Swissair and Singapore and the also the Atlantic Excellence alliance -- were they last at the dance to get a strong/large European partner?
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 5:10 am

Quoting mplsjefe (Thread starter):

" I know they are flag carriers for their respective countries, but how much can you lose before you throw in the towel?"

I don't know, ask AR.            
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Byrdluvs747
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 5:25 am

Quoting anstar (Reply 6):
BA had the opportunity to purchase KLM, however it went to AF.

BA also were dancing with SWISS but couldn't clinch that deal either.

Yes, Im aware of BA's past acquisition attempts, and I have always condemned BA's arrogance that led to the failure of the LX deal. However, I don't think BA would make the same mistake twice if KL was back on the market.

Quoting AR385 (Reply 7):
Did Obama let the three big Detroit companies go under? No. So:

1) In the same light, France will never, ever, let Air France be liquidated. Much less with Hollande at the helm of the French government.

Yes, but we don't have laws against governments lending assistance to the airlines. France must follow EU law. I suppose the French govt could help AF via labor and/or tax laws, but I don't see them writing a check.
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panamair
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 5:38 am

Quoting AR385 (Reply 7):
In the same light, France will never, ever, let Air France be liquidated.

That pretty much sums it up. The government will find whatever means necessary within EU law to ensure that there will always be an Air France.
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 5:39 am

Quoting Byrdluvs747 (Reply 10):
France must follow EU law. I suppose the French govt could help AF via labor and/or tax laws, but I don't see them writing a check.

Whatever they do. Believe me. AF won´t go anywhere. It will never disappear. Even if it means CHANGING the EU laws. Or even exiting the EU.

How much money have they poured into Peugeot? or is it Citroen? Whichever of the two. AF is massively more significant and symbolic.

[Edited 2013-05-03 22:41:38]
 
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DeltaMD90
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 5:49 am

Quoting questions (Reply 8):
Did DL ever have an opportunity to enter an alliance with BA or LH or -- even though they had experience with Swissair and Singapore and the also the Atlantic Excellence alliance -- were they last at the dance to get a strong/large European partner?

IIRC, SkyTeam was the first... DL, UA, and AF being founding members. Fuzzy on that, but I think DL was a very early player in the alliance game. That being said, partnerships went back further than alliances, so the framework for alliances might have been there. Someone more knowledgeable fill me in please!
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 6:02 am

Quoting DeltaMD90 (Reply 13):
IIRC, SkyTeam was the first... DL, UA, and AF being founding members.

Huh? Totally incorrect. Skyteam was the last of the big three alliances to form, and UA was never a member. Star was the first in 1997 followed by OW in 1999. ST didn't form until 2000, hence the term "Leftover Alliance" so often used.

Now, the Wings alliance predated all of them having been formed in 1989. However, neither DL or AF were members.

[Edited 2013-05-03 23:12:45]
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 6:28 am

Would be a dam shame if something happend to KLM. One of my favourites of the European legacies... Always pleasant to fly With them. Always very Nice crews.

Quoting DeltaMD90 (Reply 13):
SkyTeam was the first...

Star Alliance is the world's first and largest global airline alliance, headquartered in Frankfurt am Main, Germany (near Frankfurt Airport). Founded in 1997, its name and emblem represent the five founding airlines, Scandinavian Airlines, Thai Airways International, Air Canada, Lufthansa, and United Airlines.
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 8:07 am

Quoting AR385 (Reply 7):
Did Obama let the three big Detroit companies go under?

He should have. Business is business. If you can't do the job right, then get out of the way and make room for someone who can. If it happens to be a flag carrier, so be it. AF is no different than Malev in this sense (ok, so they have a MUCH bigger route network/fleet/brand name...but still).
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 8:22 am

Quoting csavel (Reply 2):
Well perhaps a healthy Delta could buy a healthy KLM so that Air France ne mourrir pas.

A healthy KLM would be more expensive to buy than a weak Air France.

Canny Delta should be checking out AF for theIr next conquest. Can AF be had for less than $200 million dollars, like Virgin Atlantic?

Quoting DeltaMD90 (Reply 3):
Sounds pretty crazy but it makes a lot of sense

It does seem to make a little sense -- to my my muddled brain right now, just having come home from the local pub!

Quoting AR385 (Reply 12):
AF won´t go anywhere. It will never disappear.

AF will never go away. But I could see them breaking up with KLM within the next twenty years.

Yes, I said TWENTY YEARS!

Quoting Mortyman (Reply 15):
Would be a dam shame if something happend to KLM.

I agree, it would.

The Netherlands, with all their history and strength as a nation could never lose KLM and remain who they are, in my mind.

Plus, they have a King now -- what that means after years of wonderful Queens, I do not know.

Cheers,

Scottie
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 10:41 am

Quoting Byrdluvs747 (Reply 10):
Yes, but we don't have laws against governments lending assistance to the airlines. France must follow EU law.

Sovereign European governments - especially the big and powerful ones - flout EU "law" all the time. That's the state of affairs these days in Europe where you have shared sovereignty between elected national governments and a partially-elected Brussels bureaucracy. What is the EU going to do? Kick France out? Please. France, like Germany, is at the heart of the entire concept of the EU. France violating EU law and providing state aid would be hypocritical. But again, that's nothing new.

As someone else put it, Air France is just about the definition of "too big to fail" in France - a quintessential national symbol of the country. This dynamic is highly representative of what is often discussed here: in Europe, regardless of the common market and consolidation/cross-ownership, national flag carriers (again, especially the big ones) are seen as national brands and ambassadorial representatives of the home countries themselves.

I agree with others - there is no way Air France is going anywhere.
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 11:09 am

Quoting csavel (Reply 2):
Well perhaps a healthy Delta could buy a healthy KLM so that Air France ne mourrir pas. Sure KLM is profitable but with those losses, time to start divesting to cover them.

That would be an odd reverse of history. KLM was one of the investors that purchased a stake in Northwest in 1989, reducing their debt burden, and improving their state of business. Delta saving KLM from AF would really be history upside down....
 
factsonly
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 12:40 pm

The issue with AF/KL are labour costs, productivity and overall efficiency at the AF unit in particular.

A comparison of AF labour costs with the labour costs of other European carriers puts AF in line with IB as the highest labour costs per unit of production of any European carriers. The current efficiency program in AF/KL aims to reduce labour costs through the loss of 5000 AF jobs and improve labour productivity for the remaining AF employees.

The KL side is much more efficient. KL unit costs are among the most competitive among European legacy carriers. It is often jokingly stated that KL is the only successful long-haul LCC, as the airline has transformed itself to a high density low cost long-haul carrier that also carries significant cargo and business traffic.

As for Transavia, the first quarter of the year is a traditional loss quarter. The full year is and has always been profitable, so it makes little sense to just consider the low winter month performance.

http://centreforaviation.com/analysi...1q-2013-with-lufthansas-but-108274
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 12:49 pm

Can any SkyTeam card holders give any insight into what it is like being a member of ST? Are they generous with rewards and points? If my local airport was a ST hub I would definitely sign up even if it is one of the lesser alliances.

Can anyone who knows about airline finance explain who is covering these losses? The rates must be very high as airlines are at quite a high risk of default. Obviously AF can't keep on making losses forever as their line of credit will be cut. Will the government bail them out in the same way the UK bailed out RBS?
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 1:44 pm

Quoting AR385 (Reply 7):
1) In the same light, France will never, ever, let Air France be liquidated. Much less with Hollande at the helm of the French government.

Actually president François Hollande is at the helm of the state, prime minister Jean-Marc Ayrault is at the helm of the government. And the minister for industrial renewal, flamboyant Arnaud Montebourg would be the most vocal should AF be in trouble.

Quoting AR385 (Reply 12):
How much money have they poured into Peugeot? or is it Citroen? Whichever of the two. AF is massively more significant and symbolic.

Peugeot and Citroën are the same company, PSA. Just like AF/KL. And I think you're looking for Renault, since it was for a long time a nationalized company, and still is 15% state owned (like AF/KL, and EADS).

Quoting Schweigend (Reply 17):
A healthy KLM would be more expensive to buy than a weak Air France.

I think that was his point, that AF could sell KL to stay afloat.

But of course there is no need for that since AF has billions in the bank.
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DeltaMD90
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 3:57 pm

Quoting Byrdluvs747 (Reply 14):
Quoting Mortyman (Reply 15):

Wow I guess I was pretty far off the mark. I know I saw that somewhere, guess I should've googled it. That's how misinformation gets spread around here, shame on me  
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HBGDS
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 4:39 pm

Quoting csavel (Reply 2):
So what is it? Culture? Wrong route structure? Poor service?

Unions. I am French, pro-AF, but I have to call it like I see it, and the fact that, for example, AF pilots are paid on avergae 50%more than their colleagues at LH says it all (I do not include compensation here--that's a different story due to differing national legislation).

SO yes, it is a mess, but no, AF won;t fail. Too big, as they said about banks here.
 
blueflyer
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 6:42 pm

First off, this is premature to say the least because the €630 millions loss that has everyone so worried is a paper loss. Bad for shareholders (although I do think they did receive a dividend) but the operational loss is smaller than the same period last year, and the group still ended 2012 with a tiny profit overall. Their results are not good, but plans for the group's demise are totally academic at this point...

And on to that. If it came to be that bad, Air France - KLM will not disappear. The most likely scenario, in my opinion, would be for the operations to be split again between the Netherlands and France, each government will work with investors to pull a move similar to what Switzerland did when Swissair went bankrupt, and HOP and Transavia will suddenly find themselves the new owners of a lot of big jets...

Quoting Braniff747SP (Reply 1):
Secondly, last I remember, it was AF that was unprofitable--I believe that KL was just fine. I don't see either failing, especially KLM.

Unless you have access to non-public information, there's no way to tell with sufficient degree of certainty which is profitable (or whether one is). The holding group's accountants are taking advantages of the difference in tax laws between both countries to shift as much cost as possible to France (where taxes are higher) in order to maximize profit (if there is one) in the Netherlands (where taxes are lower).

Quick example: when they lose money on fuel hedges, Air France takes the loss, but when they make money, the profit shows up in KLM's books.

Quoting DeltaMD90 (Reply 3):
Think it has to do with lower taxes in the Netherlands.

Yep. Same reason that, on paper, every coffee bean used by Starbucks in Europe goes through Amsterdam...

Quoting Schweigend (Reply 17):
Can AF be had for less than $200 million dollars, like Virgin Atlantic?

Not a chance.

Quoting KaiTak747 (Reply 21):
Can anyone who knows about airline finance explain who is covering these losses?

Some of them are paper losses. If your company holds an asset, and that asset loses value unexpectedly, you need to show that as a loss, even though no money changes hands. During the first quarter, the group's fuel hedges lost €200 millions in value, and it shows in the books, but the group did not pay a penny to anyone to account for that loss.

That is why judging the viability of any company by the "bottom number" alone isn't a good idea. Looking higher up, such as Operating Income, where paper losses are not included, is more telling. That doesn't make Air France - KLM a great company, it is still losing (a lot of) money, but not as much, and signs are encouraging actually. News of its impeding demise are greatly exaggerated.

As to how they financed the smaller operating loss, the group has over €4 billions in cash and untapped lines of credits worth nearly €2 billions.
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Aesma
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 7:14 pm

PSA is worth mentioning back in that discussion, since they announced a whopping 4,5 billion euros loss a few months ago. Most of this loss was in fact accounting for a loss of value of assets like manufacturing plants, real estate etc. Unions saw the move as a maneuver to get concessions from them.

Quoting HBGDS (Reply 24):
Unions. I am French, pro-AF, but I have to call it like I see it, and the fact that, for example, AF pilots are paid on avergae 50%more than their colleagues at LH says it all (I do not include compensation here--that's a different story due to differing national legislation).

Do you mean that they cost 50% more or that they get 50% more on their bank account at the end of the month ?
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
WesternA318
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 7:21 pm

Quoting mesaflyguy (Reply 9):
" I know they are flag carriers for their respective countries, but how much can you lose before you throw in the towel?"

I don't know, ask AR.

Or OA....

Quoting awacsooner (Reply 16):
He should have. Business is business. If you can't do the job right, then get out of the way and make room for someone who can. If it happens to be a flag carrier, so be it. AF is no different than Malev in this sense (ok, so they have a MUCH bigger route network/fleet/brand name...but still).

Exactly. No one gives a rats behind (except for us armchair ceo's) what airline they fly on to get to France, wether it be AF, DL, KL, VS, or the myriad of other airlines that serve CDG and ORY.
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Aesma
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 8:59 pm

Well economic liberalism is not on the platform of any political party in France, for a reason : not enough voters to support it. There are several communist/Marxist/Leninist/Trotskyst parties, though. Of course, it's a former Trotskyst, prime minister Lionel Jospin, that led to the privatization of AF and many other state champions, but let's not get caught into details !
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 9:22 pm

Quoting AR385 (Reply 7):
) In the same light, France will never, ever, let Air France be liquidated. Much less with Hollande at the helm of the French government. And

The French will always have their AIR FRANCE, it may have different stockholders and declare Chapter 11 style bankruptcy but there will always be an AF.
 
Viscount724
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sat May 04, 2013 11:06 pm

Quoting Aesma (Reply 22):
Peugeot and Citroën are the same company, PSA. Just like AF/KL. And I think you're looking for Renault, since it was for a long time a nationalized company, and still is 15% state owned (like AF/KL, and EADS).

French government ownership of EADS was very recently reduced to 12%,.
http://www.bloomberg.com/news/2013-0...ing-2-1-percent-stake-in-eads.html
 
HBGDS
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Sun May 05, 2013 4:29 am

Quoting Aesma (Reply 26):
Do you mean that they cost 50% more or that they get 50% more on their bank account at the end of the month ?

As of 2005, (the last I checked, admittedly), 50% more in the bank account at the end of the month. My source is an Aerospatiale exec whose brother flew for AF (retired in 2009). When Spinetta, tried to privatize WHILE AF was doing well, many raised shields, knowing that in the private sector they might not fare as well. AF, frankly, is a good product, notwithstanding what some A-netters claim, and despite the cultural problems it faces in its cockpits , or the disaster called CDG. But the minority unions ( less than 20% in France are actually union members)actually represent incredible power thanks to legislation. I mean, look at random CGT slowdowns or even runway invasions just to make a point.... But that is part of our history and culture. I was always amazed at KLM agreeing to the takeover, but the route access was substantial, and that is what is keeping AF going (they practically control Africa.)
 
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Mon May 06, 2013 2:08 pm

Quoting DeltaMD90 (Reply 13):
IIRC, SkyTeam was the first... DL, UA, and AF being founding members. Fuzzy on that, but I think DL was a very early player in the alliance game. That being said, partnerships went back further than alliances, so the framework for alliances might have been there. Someone more knowledgeable fill me in please!

when you say UA i think you mean CO as they were in Skyteam
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Mon May 06, 2013 6:11 pm

CO joined SkyTeam much, much later. It was - I think - a consequence of NW joining SkyTeam together with KL.
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Mon May 06, 2013 11:30 pm

Quoting JQflightie (Reply 32):
when you say UA i think you mean CO as they were in Skyteam

No I meant UA. Granted, I was 100% wrong, but I definitely heard UA. Now I really want to know where I heard that egregiously wrong info from, I think it might have been this very website, not surprised lol
Ironically I have never flown a Delta MD-90 :)
 
JQflightie
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Tue May 07, 2013 3:04 am

Quoting DeltaMD90 (Reply 34):
No I meant UA. Granted, I was 100% wrong, but I definitely heard UA. Now I really want to know where I heard that egregiously wrong info from, I think it might have been this very website, not surprised lol

UA was a founding member of Star Aliance, but Continental was with Skyteam. These are the facts, goodluck with your search  
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lucky777
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Tue May 07, 2013 3:17 am

Quoting Byrdluvs747 (Reply 14):
Huh? Totally incorrect. Skyteam was the last of the big three alliances to form, and UA was never a member

Anybody remember the ATLANTIC EXCELLENCE alliance that Delta formed along with Swissair, Sabena and Austrian Airlines back in 1997?

I was wondering how these massive losses by AF were affecting Delta since the carriers share revenues, and i would have to presume losses, on much of their transatlantic service. Is Delta also being hurt by these losses as well?
 
goldorak
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RE: If AF/KLM Fails, Does SkyTEAM Fall Too?

Tue May 07, 2013 5:39 am

Quoting lucky777 (Reply 36):
I was wondering how these massive losses by AF were affecting Delta since the carriers share revenues, and i would have to presume losses, on much of their transatlantic service. Is Delta also being hurt by these losses as well?

I might be wrong, but I don't think it is affecting DL. AF long-haul ops are profitable. It's the short- and medium-haul sector which is bleeding money.