devron
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Re: Dutch government increases stock holding in KL-AF group.

Wed Feb 27, 2019 9:26 pm

Not seen every day. Does AF/KL pay dividend so the dutch state with their 0.1% interest on lending actually makes money on this move?
 
marcelh
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Re: Dutch government increases stock holding in KL-AF group.

Wed Feb 27, 2019 9:27 pm

Dieuwer wrote:
Not sure why many think that without AF, KL would have been gone by now. Because that same reasoning could be applied to AZ, and we all know AZ is still around despite printing red ink since the dawn of times.


There is a reason why the Italian debt is way bigger compared to some other EU members.....
 
Dieuwer
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Re: Dutch government increases stock holding in KL-AF group.

Wed Feb 27, 2019 9:31 pm

Dieuwer wrote:
If the AF side is so unhappy with KL they should breakup the marriage and hook up with AZ. Lots of cultural similarities: both love to strike and both love to take government handouts. Should be a match made in heaven! :D


I already have a name for this new airline: "Club Med Airways". ;)
Last edited by Dieuwer on Wed Feb 27, 2019 9:31 pm, edited 1 time in total.
 
L410Turbolet
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Re: Dutch government increases stock holding in KL-AF group.

Wed Feb 27, 2019 9:31 pm

MrBren wrote:
harder. The French part wants more integration between the two companies while the Dutch one wants the exact contrary, that will be an unmanageable mess.

There already is unmanageable (irreformable) mess. It's called Air France. And CDG.
 
Dieuwer
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Re: Dutch government increases stock holding in KL-AF group.

Wed Feb 27, 2019 9:32 pm

marcelh wrote:
Dieuwer wrote:
Not sure why many think that without AF, KL would have been gone by now. Because that same reasoning could be applied to AZ, and we all know AZ is still around despite printing red ink since the dawn of times.


There is a reason why the Italian debt is way bigger compared to some other EU members.....


Perhaps a better comparison would be with VS.
 
Curiousflyer
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Re: Dutch government increases stock holding in KL-AF group.

Wed Feb 27, 2019 9:42 pm

chonetsao wrote:
Curiousflyer wrote:
I am also surprised at how obsessed KLM are with keeping all of their profit or claiming AF is eating their lunch: without the AF merger they would have been crushed by competition because they could not get to a critical size. Or they would have had to become a LCC and their employees would have suffered from that. AF is the only buyer that guaranteed that KLM could retain significant independence and protect its workforce, unlike LH or BA that were only offering to treat them the way Swiss or IB have been treated, with much more integration.

I am under the impression that KL are not taking proper advantage of the independence they secured: instead of complaining all the time can they think about the way they can positively contribute to the group, while maintaining their own spirit and growth? Because let's not forget that over the past 15 years KL did not stop growing, so it is very weird to say that AF is taking business from them, on the contrary I think that the group ensures they keep a good balance between the markets of both airlines so they can play the right strengths in the right markets.


There are lots of IF in your statement. IF the merger did not happen, KLM MAY not survive. How about IF the merger did not happen, KLM may have partnered with NW and now DL and grew even bigger? IF is IF, it did not happen. That is why it is IFs.

Nobody knows what would have happened if it did not happen. End of.


I disagree, there is not a single "if" in my statement. Nobody forced KL to merge with AF, KL did it because they were convinced that they would be better off doing so, and it was explained at length at the time that AF was the preferred partner because BA was not making a good offer. So I am insisting that it seems to me that their expectations from this merger are not reasonable and that I still cannot think of a better solution for KL. The partnership with NW had been going on for a decade and was not sufficient, why would it be sufficient now? VS is not really in partnership with DL, they are actually controlled by them (even though it cannot be said because DL is not a UK or European company), after having been controlled by SQ. The UK government is letting this happen for VS but I am not sure the NL Government would be so accomodating.

If KL tries and goes solo today they will be eaten alive or become a true LCC. If they get into the arms of an another airline than AF they will not get such a deal and the blue paint on the planes will be just that, paint.
 
Thibault973
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 1:26 am

All of this French bashing (nothing new really) and yet France is still #1 for international tourists arrivals.
 
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EVAAIRBR076
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 5:25 am

Thibault973 wrote:
All of this French bashing (nothing new really) and yet France is still #1 for international tourists arrivals.


Based on? The problem with french is that they do things "the french way" . Myself work for what used to be the biggest public transport company of the Netherlands called Connexxion. In that time we had a market share of 80% of all the public transport in the Netherlands. When sold to the french Trandev it went down hill because of french so called logical decision. And now I think we only have a market share of 35-40% of all the public transport in the Netherlands.
 
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MrBren
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 7:06 am

EVAAIRBR076 wrote:
Thibault973 wrote:
All of this French bashing (nothing new really) and yet France is still #1 for international tourists arrivals.


Based on? The problem with french is that they do things "the french way" . Myself work for what used to be the biggest public transport company of the Netherlands called Connexxion. In that time we had a market share of 80% of all the public transport in the Netherlands. When sold to the french Trandev it went down hill because of french so called logical decision. And now I think we only have a market share of 35-40% of all the public transport in the Netherlands.


I worked for a French financial company that bought a Dutch one in the early 2000. I can tell you that working with the Dutch people was a nightmare! They were always suspicious about anything. So you can have facts that it is difficult to work with French people, the contrary is also true. Today, the Dutch company is still owned by the French and has tremendously grew.
 
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Taxi645
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 7:13 am

Can we get over this French vs Dutch stuff? It is so boring.

I think getting AF-KLM more competitive is a more important issue.
Innovation is seeing opportunity before obstacle.
 
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Taxi645
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 7:34 am

jsfr wrote:
Taxi645 wrote:
"Declaration of war", "revenge". Let us put aside primal responses for a second...

This move is mainly three things:

1 A signal, a line in the sand. We are serious about our interests and we won't be fooled around with.

2 An insurance policy to make sure that agreements made during the merger can be upheld.

3 A commitment to AF-KLM. Let's not forget the Dutch government spend 680 million euro's to get an equal share. That is a serious commitment. Rather than a declaration of war this is also a signal that we believe in AF-KLM and we want to make it work. Otherwise you don't invest your money in it.

As said in de KLM CEO thread, I think AF-KLM could become more competitive in two ways:

1 Mainly AF get's more competitive
2 Further integration of both airlines.

For the second to happen, as far as KLM is concerned I reckon, the former must happen first. Now we see the first part being skipped and heading straight for the second. I think the Dutch are making very clear that that's not gonna happen. Yes, the investment without notice is not the most elegant move, but I reckon the Dutch just wanted to make sure they got what they were aiming for.
I would add that the "agreements made during the merger" was 15 years ago - surely a modicum of change in 15 years is expected in any big company?


Sure, but with mutual consent and in line with the spirit of the original agreement.

Your comment (and that of almost all Dutch posters) that AF nees to become more competitive is fair, but I think it is also fair to acknowledge the steps forward in teh past few months since Smith has started... For example:
- Getting rid of Joon
- Exceptional progress in French union relations
- Removing a number of the historical French (political) c-suite appointees
- Rationalising the A380 fleet...


- Joon was just undoing something recently introduced. So basically no change longer term.
- Unions, indeed very good progress but at what price? The result doesn't provide the required competiveness in the long run. Although the question is if that is really achievable without major change.
- c-suites, ok noted.
- A380, sure but peanuts in the bigger picture.


About Elbers allegedly refusing the top position. I can very well imagine him doing so in the current situation if true. I doubt anyone sincere would admit that a KLM-man taking the AF-KLM wheel would succeed at getting the AF side more competitive the way things are at the moment.

P.S. I think we all could use a bit more of French lifestyle in our lives.
Innovation is seeing opportunity before obstacle.
 
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Dutchy
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 7:44 am

Taxi645 wrote:
[About Elbers allegedly refusing the top position. I can very well imagine him doing so in the current situation if true. I doubt anyone sincere would admit that a KLM-man taking the AF-KLM wheel would succeed at getting the AF side more competitive the way things are at the moment.


Apparently, it is true, mr. Smith, president (non-excecutive board member) of KLM, said so in a TV interview last night. He said Elbers was offered the position but refused because he wants to continue to work at KLM for another 4 years to finish his job there. But that is a great excuse of course, not to take the position mr. Smith has now.
Many happy landings, greetings from The Netherlands!
 
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Dutchy
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 7:49 am

Great article about the process of coming to this decision.

It is in Dutch, but with google translate, you should be able to follow it.

https://www.volkskrant.nl/nieuws-achter ... 8be7e4eeb1

> main point, the Dutch government has been in talks with the French to take over part of their stake in AFKL group, this lead to nothing, so it bought it on the stock market, which was not the preferred option. All of this came about because of Americans and Chinese got a stake without informing the Dutch government. So it was a wake-up call, that the French didn't want to cooperate, but just did their thing. Now they have to listen....
Many happy landings, greetings from The Netherlands!
 
L410Turbolet
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 9:13 am

jsfr wrote:
keesje wrote:
I think deep down every body knows what the french really wants.


A succesful AF/KL?


The same thing they'are trying to achieve with "federalized" EU? Turn it into a little French empire, paid for by others?

IF the merger did not happen, KLM MAY not survive. How about IF the merger did not happen, KLM may have partnered with NW and now DL and grew even bigger?

Given the state of affairs in both airlines, the really interesting question is: where would be AF with their mismanagement, staff morale, militant unions, crappy home airport... etc. etc. without the KL as a backup?
 
JBH
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 9:19 am

Dutchy wrote:
Great article about the process of coming to this decision.

It is in Dutch, but with google translate, you should be able to follow it.

https://www.volkskrant.nl/nieuws-achter ... 8be7e4eeb1

> main point, the Dutch government has been in talks with the French to take over part of their stake in AFKL group, this lead to nothing, so it bought it on the stock market, which was not the preferred option. All of this came about because of Americans and Chinese got a stake without informing the Dutch government. So it was a wake-up call, that the French didn't want to cooperate, but just did their thing. Now they have to listen....


I still think France was somehow aware through backchannels. It says in the article that there have been talks between governments since 2017 and that the French government refused to sell part of their stake to the Dutch. Not because they didn't want but because they could not 'explain it to the public'. They might have told the Dutch government that if they want to become a shareholder to buy it on the market and that they would not be involved publicly. The French and the Dutch can probably agree together on ways forward that are good for both countries and the 30% combined stake will ensure enough power to do so. Macron's government will not spend money on acquiring a bigger stake itself ( they have enough other problems), so the Dutch money is welcome. Maybe I am completely off but as I said before there is usually more going on than we are aware of.
 
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Dutchy
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 9:26 am

JBH wrote:
Dutchy wrote:
Great article about the process of coming to this decision.

It is in Dutch, but with google translate, you should be able to follow it.

https://www.volkskrant.nl/nieuws-achter ... 8be7e4eeb1

> main point, the Dutch government has been in talks with the French to take over part of their stake in AFKL group, this lead to nothing, so it bought it on the stock market, which was not the preferred option. All of this came about because of Americans and Chinese got a stake without informing the Dutch government. So it was a wake-up call, that the French didn't want to cooperate, but just did their thing. Now they have to listen....


I still think France was somehow aware through backchannels. It says in the article that there have been talks between governments since 2017 and that the French government refused to sell part of their stake to the Dutch. Not because they didn't want but because they could not 'explain it to the public'. They might have told the Dutch government that if they want to become a shareholder to buy it on the market and that they would not be involved publicly. The French and the Dutch can probably agree together on ways forward that are good for both countries and the 30% combined stake will ensure enough power to do so. Macron's government will not spend money on acquiring a bigger stake itself ( they have enough other problems), so the Dutch money is welcome. Maybe I am completely off but as I said before there is usually more going on than we are aware of.


Probably yes, so public outrage and private a welcome move, who knows.

The Dutch are normally of the harmonic nature, discuss and reach a consensus, unless the other party is unreasonable, then the conflict model could be a way to shift the others opinion and get back on the table. Given the sensitivity around buying stock off the market, I don't think the French were aware of the precise moment, but I do think they were aware of the intentions, or at least should have been aware that this move was coming.

Our Parlement was involved, but the key members of parliament were sworn to secrecy, even towards their own chairman of the party. As a taxpayer, it is quite worrisome that this kind of money can be spent on this kind of thing without due democratic overside, I don't have the answer to how this could be done, but this feels to flimsy to me. I would understand that in an emergency - bank crisis - this could be done, but this isn't like that at all.
Last edited by Dutchy on Thu Feb 28, 2019 9:33 am, edited 1 time in total.
Many happy landings, greetings from The Netherlands!
 
factsonly
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 9:27 am

Apparently the story is quite different than portrayed by some:

- The NL Government raised its wish to purchase AFKL Holding shares in 2017 with the French Government.

- The NL Government at the time insisted that it wished to achieve a share holding in a friendly and cooperative way with the French.

- The French Government at the time let it be known that they planned to reduce their AFKL share holding, so the NL Government offered to buy shares of the French Government.

- The French Government responded to the NL request: 'We can not explain this to the French public'. However NL Government raised it again...and again, without success.

- NL Government was not informed by the French that DL and MU were each given a significant share in the AFKL Holding, triggering a strategic response from NL Government.

- In 2018 the NL Government decided that if it could not fulfill its strategic wish in a cooperative diplomatic manner, a open market stock purchase was its only alternative.

- NL Government waited with the stock purchase for the 2018 troubles of (1) AF strikes and (2) new CEO appointment to clear.

- The early 2019 troubles around the re-appointment of KL CEO Elbers, triggered the NL Government decision in early February 2019, BEFORE the visit of CEO Smith to the NL Government.

- In light of the above, the French Government claim of 'surprise' and 'not being informed' seems somewhat debatable.
 
Flanker7
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 1:07 pm

The French government might block Elbers reelection and would like to postpone the shareholders meeting in April. Retaliation from the French? Both ministers will meet tomorrow and hopefully they will clear things up between them.
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JBH
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 1:16 pm

One thing I have been wondering about. Maybe someone here can shed some light on this.
We keep on hearing that AF may 'undress' KL and that flights will be moved to CDG and the hub function of AMS is under threat. However what would be the logic behind that. Forgetting the profit argument for a moment:

1.If AFKL is to be a major player in the future, I would say it needs at least two strong hubs, given that AMS is particularly good at the hub function, AFKL would shoot itself in the foot closing it down.
2. How much would AF really gain from moving Dutch passengers to CDG? The Netherlands is a small market and many of the Dutch passengers would probably chose competition from AMS over AF. I can understand the logic of doing that to AZ because Italy is a big market.
3. All those pax transfering through AMS today, would transfer through CDG? Maybe some, but I doubt that would happen on a 1-1 basis. Most likely people will avoid CDG and move to similar airports to AMS like MUC. So in the big picture, closing the AMS hub would probably reduce the total Pax of AFKL.
4. I can imagine that Delta wants to keep its AMS hub going. It is very profitable for them and gives them flexibility of various airports. AMS' focus on hub operations must be favourable for Delta operations.

Maybe I am missing something but I can understand the logic of moving jobs to Paris and moving money to cover gaps in Paris but flights? Maybe some but not to the extend that is claimed and would kill the AMS hub.
 
blueflyer
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 1:46 pm

Jetty wrote:
I don't doubt your real-life experience, and I knew that happened before you mentioning it. Where you go wrong is assuming your personal experience applies to AFKL. As I explained this doesn't make sense in their situation as unlike most other concerns they don't fully own their operations in The Netherlands (KLM) but only receive 93% of dividends and they would thus be giving away free money to other KL shareholders by shifting profits to KL on paper. If that doesn't make sense to you please explain why a French company with the French government as largest shareholder would be giving away 7% of their profits to other shareholders of KL.

93% of after-tax profit taxed at the standard corporate rate in the Netherlands is more than 100% of the same profit after the standard French corporate rate. Standard corporate tax rates are public (you can do the math). As are some of the many discounted rates in the Netherlands (far more than in France).
The Trump/Johnson special relationship: Special people on both sides of the Atlantic
 
Jetty
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 5:02 pm

TYCOON wrote:
Jetty wrote:
TYCOON wrote:
Apparently I am much more informed than you are, and I have even provided my real-life experience having served on boards of French companies with significant Dutch operations... It's called real life... not internet jibberish that you seem to espouse endlessly here. Your rationale makes 0 sense... probably why you are likely to not be running much!!

I don't doubt your real-life experience, and I knew that happened before you mentioning it. Where you go wrong is assuming your personal experience applies to AFKL. As I explained this doesn't make sense in their situation as unlike most other concerns they don't fully own their operations in The Netherlands (KLM) but only receive 93% of dividends and they would thus be giving away free money to other KL shareholders by shifting profits to KL on paper. If that doesn't make sense to you please explain why a French company with the French government as largest shareholder would be giving away 7% of their profits to other shareholders of KL.


@jetty
It's simple... it's called leakage... and if the benefits (in the form of reduced taxes) outweigh the leakage, then firms will do it. Tax optimization 101.


blueflyer wrote:
93% of after-tax profit taxed at the standard corporate rate in the Netherlands is more than 100% of the same profit after the standard French corporate rate. Standard corporate tax rates are public (you can do the math). As are some of the many discounted rates in the Netherlands (far more than in France).


Giving away 7% of net profits isn't what I would call 'leakage', but rather a giant spill. Apparently that could still make sense financially because taxes in France are so high, but I do doubt it to happen AFKL because I haven't seen any analist mention this as a major reason for the difference between profitability between AF and KL, and it seems unlikely France as largest shareholder wouldn't object.
 
Jetty
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 5:13 pm

The French anger is so great that the reappointment of Pieter Elbers as CEO of KLM would be in danger

https://www.businessinsider.nl/de-frans ... zou-staan/ (Dutch)

The French government trying to get involved in the appointment of a Dutch CEO just one day after warning the Dutch government against state influence. :boggled:

If the French do try to make that happen I wouldn't be surprised if the Dutch government buys back KL for ~2-4 billion euro's. Domestic reactions to the acquisition of shares was overwhelmingly positive so the politicians involved would have to confidence to do so if needed, and finances wouldn't be an issue @ 55% state debt.
 
JBH
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 5:36 pm

blueflyer wrote:
Jetty wrote:
I don't doubt your real-life experience, and I knew that happened before you mentioning it. Where you go wrong is assuming your personal experience applies to AFKL. As I explained this doesn't make sense in their situation as unlike most other concerns they don't fully own their operations in The Netherlands (KLM) but only receive 93% of dividends and they would thus be giving away free money to other KL shareholders by shifting profits to KL on paper. If that doesn't make sense to you please explain why a French company with the French government as largest shareholder would be giving away 7% of their profits to other shareholders of KL.

93% of after-tax profit taxed at the standard corporate rate in the Netherlands is more than 100% of the same profit after the standard French corporate rate. Standard corporate tax rates are public (you can do the math). As are some of the many discounted rates in the Netherlands (far more than in France).


I am somewhat surprised by this discussion. Maybe I am missing something but I work for a major company with subsidiaries all over Europe (HQ is in Belgium). We have full ownership in some subsidiaries and in others majorities. It is completely illegal for us to transfer profits from one country to another, profit has to be declared in the country where it is made. What we can do is transfer an amount of Euros as support but this needs a lot of justification through memoranda, proof of spending on required support activities and needs to comply to certain rules (you cannot just support what you like). Every time we give anything to any country we go through a tough process of control even for 100k Euros, all is documented in case tax authorities ask for proof. It would seem difficult to transfer anything from AF to KL since there is little justification as to why KL needs support, especially if you talk many millions. The French authorities would jump on these transfers very quickly. Anyway, maybe in airline business there is a different rule but I doubt that.
 
Curiousflyer
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 5:37 pm

No French newspaper seems to question the reappointment of Pieter Elbers, they even say that the decision to match the French State share in the capital was taken back in 2017 by the Dutch Government and that Elbers was not informed of the purchase until after it started.

It does look like Benjamin Smith ruffled the feathers of the Dutch though, and they do not want to become a "lower cost" airline of AFKL. I cannot tell how to manage an airline, but from a client's point of view, having flown business class with both, AF is currently vastly superior to KL in terms of soft product (in terms of hard product the seats are virtually the same, at least in the newest version, the differences are only cosmetic). I find the AF soft product better because:
- the AF lounges are quite luxurious (for example champagne vs. Heineken on tap)
- the AF food is pretty good (KL: not good)
- the AF staff has more class (KL: efficient and friendly but unsophisticated)
I am not saying that KL does not have some advantages (I understand that their on-time record is better for example) but in my view, I prefer to fly AF in business. I also understand that someone else might have completely different expectations of business class and find KL to be a better fit.

When I look at it from the outside, it is a bit depressing: KL is successful and their employees are well paid, AF has done a lot of soul-searching and despite a rocky modus operandi, they are still at least somewhat profitable and working to improve their service and profitability. At first I felt that hiring a CEO who is not even European was a stupid idea because the French backlash would be irrational, and finally I thing the guy did a pretty good initial job, but the Dutch are obviously not of the same advice. I do not know who is right (probably noone) but those nasty fights seem like an unwelcome distraction when so much is left to be done.
 
jsfr
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 6:26 pm

JBH wrote:
blueflyer wrote:
Jetty wrote:
I don't doubt your real-life experience, and I knew that happened before you mentioning it. Where you go wrong is assuming your personal experience applies to AFKL. As I explained this doesn't make sense in their situation as unlike most other concerns they don't fully own their operations in The Netherlands (KLM) but only receive 93% of dividends and they would thus be giving away free money to other KL shareholders by shifting profits to KL on paper. If that doesn't make sense to you please explain why a French company with the French government as largest shareholder would be giving away 7% of their profits to other shareholders of KL.

93% of after-tax profit taxed at the standard corporate rate in the Netherlands is more than 100% of the same profit after the standard French corporate rate. Standard corporate tax rates are public (you can do the math). As are some of the many discounted rates in the Netherlands (far more than in France).


I am somewhat surprised by this discussion. Maybe I am missing something but I work for a major company with subsidiaries all over Europe (HQ is in Belgium). We have full ownership in some subsidiaries and in others majorities. It is completely illegal for us to transfer profits from one country to another, profit has to be declared in the country where it is made. What we can do is transfer an amount of Euros as support but this needs a lot of justification through memoranda, proof of spending on required support activities and needs to comply to certain rules (you cannot just support what you like). Every time we give anything to any country we go through a tough process of control even for 100k Euros, all is documented in case tax authorities ask for proof. It would seem difficult to transfer anything from AF to KL since there is little justification as to why KL needs support, especially if you talk many millions. The French authorities would jump on these transfers very quickly. Anyway, maybe in airline business there is a different rule but I doubt that.


It is a little more complicated than transferring profits/monies/spending etc.

Nonetheless, that is what companies do everywhere, both on an opportunistic operational basis - but more when setting up their strategic infrastructure and purchases.

My (extremely cautious) multinational company headquartered in DC - but registered in Delaware has our European heardquarters in London - but registered in Scotland, with units in about 130 countries worldwide all with differing tax rates, and tax legislation. We have a large team of Lawyers and financial experts entirely dedicated to fiscal optimisation - about 12 people in Europe. They could do more (think Jersey, Liechtenstein, etc.) but we are mega-paranoid about doing anyhting that could even potentially be seen as illegal, dubious or immoral (or create negative PR).

There are so many things that can be leveraged without touching anything like "moving profits". Things like deciding where aircraft are registered (look at Easyjet...), different amortisation rates on ground infrastructure, royalty fees, etc. It is way too complicaetd for me - but every company oes it and not to do so in todays world for a truly major global company would really be irresponsable.
 
jsfr
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 6:34 pm

JBH wrote:
We keep on hearing that AF may 'undress' KL and that flights will be moved to CDG and the hub function of AMS is under threat. However what would be the logic behind that. Forgetting the profit argument for a moment:

1.If AFKL is to be a major player in the future, I would say it needs at least two strong hubs, given that AMS is particularly good at the hub function, AFKL would shoot itself in the foot closing it down.
2. How much would AF really gain from moving Dutch passengers to CDG? The Netherlands is a small market and many of the Dutch passengers would probably chose competition from AMS over AF. I can understand the logic of doing that to AZ because Italy is a big market.
3. All those pax transfering through AMS today, would transfer through CDG? Maybe some, but I doubt that would happen on a 1-1 basis. Most likely people will avoid CDG and move to similar airports to AMS like MUC. So in the big picture, closing the AMS hub would probably reduce the total Pax of AFKL.
4. I can imagine that Delta wants to keep its AMS hub going. It is very profitable for them and gives them flexibility of various airports. AMS' focus on hub operations must be favourable for Delta operations.

Maybe I am missing something but I can understand the logic of moving jobs to Paris and moving money to cover gaps in Paris but flights? Maybe some but not to the extend that is claimed and would kill the AMS hub.


Totally agree with that - plus, does CDG/AMS have the capacity to grow enough should the decision be made to move to one hub instead of two?

Surely someone on this discussion has the percentage of transfer pax at Schiphol originating form France and the percentage of transfer pax at CDG originating from Holland?

I am very often travelling via Schiphol due to either cheaper flights or better timings. At the same time, my Dutch counterparts ar very often flying via CDG for exactly the same reason!

We had a very amusing conference in Dubai in December. I travelled via AMS, and saved about 500 eur over the direct AF flight. My Dutch colleague travelled via CDG and saved about 300 eur over thhe direct KL flight. He enced up travelling on my more expensive AF flight and I ended up travelling on his direct KL flight... Happens all teh time...
 
JBH
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 6:43 pm

jsfr wrote:
JBH wrote:
blueflyer wrote:
93% of after-tax profit taxed at the standard corporate rate in the Netherlands is more than 100% of the same profit after the standard French corporate rate. Standard corporate tax rates are public (you can do the math). As are some of the many discounted rates in the Netherlands (far more than in France).


I am somewhat surprised by this discussion. Maybe I am missing something but I work for a major company with subsidiaries all over Europe (HQ is in Belgium). We have full ownership in some subsidiaries and in others majorities. It is completely illegal for us to transfer profits from one country to another, profit has to be declared in the country where it is made. What we can do is transfer an amount of Euros as support but this needs a lot of justification through memoranda, proof of spending on required support activities and needs to comply to certain rules (you cannot just support what you like). Every time we give anything to any country we go through a tough process of control even for 100k Euros, all is documented in case tax authorities ask for proof. It would seem difficult to transfer anything from AF to KL since there is little justification as to why KL needs support, especially if you talk many millions. The French authorities would jump on these transfers very quickly. Anyway, maybe in airline business there is a different rule but I doubt that.


It is a little more complicated than transferring profits/monies/spending etc.

Nonetheless, that is what companies do everywhere, both on an opportunistic operational basis - but more when setting up their strategic infrastructure and purchases.

My (extremely cautious) multinational company headquartered in DC - but registered in Delaware has our European heardquarters in London - but registered in Scotland, with units in about 130 countries worldwide all with differing tax rates, and tax legislation. We have a large team of Lawyers and financial experts entirely dedicated to fiscal optimisation - about 12 people in Europe. They could do more (think Jersey, Liechtenstein, etc.) but we are mega-paranoid about doing anyhting that could even potentially be seen as illegal, dubious or immoral (or create negative PR).

There are so many things that can be leveraged without touching anything like "moving profits". Things like deciding where aircraft are registered (look at Easyjet...), different amortisation rates on ground infrastructure, royalty fees, etc. It is way too complicaetd for me - but every company oes it and not to do so in todays world for a truly major global company would really be irresponsable.


Fair enough. I am no expert either but I suppose a team of experts could find 'loop holes' or some type of construction. As in your company, what I do know is that we are 'extremely cautious' with these types of operations.
 
Jetty
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 8:05 pm

Curiousflyer wrote:
No French newspaper seems to question the reappointment of Pieter Elbers

From 'Les Echos':
Selon nos informations, Bercy serait même prêt à bloquer la convocation de l'assemblée générale des actionnaires d'Air France-KLM, prévue en avril et qui doit notamment reconduire le mandat du président de KLM, Pieter Elbers, pour contraindre les Néerlandais à revenir à de meilleurs sentiments.

According to our information, the government would even be ready to block the convening of the general meeting of shareholders of Air France-KLM, scheduled for April and which must in particular renew the mandate of KLM chairman, Pieter Elbers, to compel the Dutch to return to better feelings.


https://webcache.googleusercontent.com/ ... clnk&gl=nl
 
Curiousflyer
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 8:26 pm

Jetty wrote:
Curiousflyer wrote:
No French newspaper seems to question the reappointment of Pieter Elbers

From 'Les Echos':
Selon nos informations, Bercy serait même prêt à bloquer la convocation de l'assemblée générale des actionnaires d'Air France-KLM, prévue en avril et qui doit notamment reconduire le mandat du président de KLM, Pieter Elbers, pour contraindre les Néerlandais à revenir à de meilleurs sentiments.

According to our information, the government would even be ready to block the convening of the general meeting of shareholders of Air France-KLM, scheduled for April and which must in particular renew the mandate of KLM chairman, Pieter Elbers, to compel the Dutch to return to better feelings.


https://webcache.googleusercontent.com/ ... clnk&gl=nl


I missed that. Not very nice from the French government, I wonder why they have to get into that battle given the many other issues they are currently facing.
 
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Dutchy
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 8:27 pm

Jetty wrote:
Curiousflyer wrote:
No French newspaper seems to question the reappointment of Pieter Elbers

From 'Les Echos':
Selon nos informations, Bercy serait même prêt à bloquer la convocation de l'assemblée générale des actionnaires d'Air France-KLM, prévue en avril et qui doit notamment reconduire le mandat du président de KLM, Pieter Elbers, pour contraindre les Néerlandais à revenir à de meilleurs sentiments.

According to our information, the government would even be ready to block the convening of the general meeting of shareholders of Air France-KLM, scheduled for April and which must in particular renew the mandate of KLM chairman, Pieter Elbers, to compel the Dutch to return to better feelings.


https://webcache.googleusercontent.com/ ... clnk&gl=nl


That would mean an act of war to the Dutch employees whom en mass supported their CEO. Would be the most stupid move for the company and would actually be a confirmation to the Dutch suspitions.
Many happy landings, greetings from The Netherlands!
 
YIMBY
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 8:32 pm

Dieuwer wrote:
The AF/KL board apparently consists of 10 French directors, 5 Dutch directors, and 1 American. No wonder things are as they are. The French can just easily vote themselves goodies paid from the pockets of the Dutch.


The directors of a PLC are obliged to pursue the best of the enterprise and are forbidden to favour one shareholder at the cost of others. If they make decisions that favour one shareholder, were it French or Dutch government or any outsider but reduces the profit, other shareholders may sue them and they may be liable for lost profits (dividends). (Remember, Henry Ford was sued when he paid too big salaries.)

Of course the shareholders can vote at the general assembly and a big enough portion of shares gives decisive power to decide mergers or unmergers, but not much more.
 
Jetty
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 10:45 pm

Dieuwer wrote:
The so-called French "quality newspapers" have lowered themselves to the level of the gutter press (i.e. tabloid like the Daily Mirror) by using hyperventilating headlines like "Blitzkrieg".

Not all of them: 'Le Figaro' has a very fair vieuw on the matter:

A series of costly strikes last year by pilots and other staff at Air France added to concerns that KLM's profits were being used to spare the French airline from making painful cost-cutting steps. They ended only after Smith agreed to multi-year pay increases that analysts said were barely justified by Air France's finances. KLM's operating profit of 1.1 billion euros last year far outsripped the 266 million reported by Air France -- even though Air France has a fleet of more than 300 planes, compared with around 170 for KLM. "In an ever more competitive aviation industry, KLM has watched, flabbergasted, as the French side does everything it can to avoid change, especially its pilots," French daily Le Figaro said in a front-page editorial Thursday. "At a time of rising nationalism, this two-speed progress renders things impossible in the alliance," it said.
https://www.bangkokpost.com/news/world/ ... h-up-stake
 
Max Q
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Re: Dutch government increases stock holding in KL-AF group.

Thu Feb 28, 2019 11:52 pm

747classic wrote:
Very good move, finally the Dutch government is acting.
This is the only way to gain more influence in the holding.



74Classic, please check your private
messages
The best contribution to safety is a competent Pilot.


Guns and the love of them by a loud minority are a malignant and deadly cancer inflicted on American society
 
juliuswong
Moderator
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 3:11 am

Jetty wrote:
The French anger is so great that the reappointment of Pieter Elbers as CEO of KLM would be in danger

https://www.businessinsider.nl/de-frans ... zou-staan/ (Dutch)

The French government trying to get involved in the appointment of a Dutch CEO just one day after warning the Dutch government against state influence. :boggled:

If the French do try to make that happen I wouldn't be surprised if the Dutch government buys back KL for ~2-4 billion euro's. Domestic reactions to the acquisition of shares was overwhelmingly positive so the politicians involved would have to confidence to do so if needed, and finances wouldn't be an issue @ 55% state debt.

This will be one messy divorce if it happens.
- Life is a journey, travel it well -
 
yoni
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 7:23 am

This whole thread is becoming ridiculous. It's either French-bashing or Dutch-bashing. Is it possible to have a grown-up discussion?
My hope is that things will eventually calm down. Both the Dutch and the French will come to their senses for the greater good of AF-KLM. Neither the Dutch or the French have any interests in failing or de-merging for chauvinistic reasons. Stakes are too high. KLM alone will face tremendous competition from IAG, LH and low-cost airlines. Same for AF.
 
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Taxi645
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 7:32 am

yoni wrote:
This whole thread is becoming ridiculous. It's either French-bashing or Dutch-bashing. Is it possible to have a grown-up discussion?
My hope is that things will eventually calm down. Both the Dutch and the French will come to their senses for the greater good of AF-KLM. Neither the Dutch or the French have any interests in failing or de-merging for chauvinistic reasons. Stakes are too high. KLM alone will face tremendous competition from IAG, LH and low-cost airlines. Same for AF.


Agreed. Although I must say that crossing the line that has just been put in the sand by threathening to block the reappointment of Elbers is probably not the smartest way to calm down and de-escalate.
Innovation is seeing opportunity before obstacle.
 
yoni
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 8:20 am

Taxi645 wrote:
Agreed. Although I must say that crossing the line that has just been put in the sand by threathening to block the reappointment of Elbers is probably not the smartest way to calm down and de-escalate.


I agree. Right now the Dutch and the French are upset at each other like kids. I think that they will pass their differences and agree on a new modus operandi between them. The real issues are not Elbers or Smith, but KLM's future in AMS and AF's stability and return to growth. Both could be gone, these issues would remain. The Dutch must find ways to accelerate the expansion of KLM's hub that will continue to benefit the group and the alliance. The French must continue to restructure AF for better performance and recapture lost market share with a consistent strategy. It's doable if they work as a team.
 
Lewton
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 9:02 am

Given that both airlines were profitable on their own in the last fully reported fiscal annual results, why not divorce and each go its own way?

I'm sure they can find other partners.
Random examples:
KLM could merge with Virgin Atlantic (depending on what the final Brexshit deal will look like) and have Delta as a strong shareholder, while Air France could acquire Norwegian.
 
Flanker7
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 9:43 am

French minister Le Maire en dutch counterpart Hoekstra have cleared the air between them. Both party's said that they have the same intentions making AF/KL the best airline in the world. We can all go to sleep now.
Flying blue only if possible
 
C010T3
Posts: 1956
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 9:57 am

The reactions in France are really not surprising. The correct way to deal with this should be self-reflection, not criticism of the Dutch government.
I don't think that is the interest of the Dutch government to intervene in the company, but only force the French government to no longer do it.
Both government should now seat down, discuss and form a common shareholding bloc. The intention of the bloc would be neutralize the political and nationalistic forces within the company. With time, they would divest in tandem, leaving the AF-KL to be a solely market-driven airline group.
 
YIMBY
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 11:21 am

Lewton wrote:
Given that both airlines were profitable on their own in the last fully reported fiscal annual results, why not divorce and each go its own way?

I'm sure they can find other partners.
Random examples:
KLM could merge with Virgin Atlantic (depending on what the final Brexshit deal will look like) and have Delta as a strong shareholder, while Air France could acquire Norwegian.


AF might also merge with SK and LO: both are shadowed by LH and might be better in another alliance. Norwegian might be equally bought by KLM. AY makes less sense (but stealing it from IAG might be a good catch) and AZ no sense. (Though most of the above are not unconditionally for sale)

Certainly both AF and KL are strong enough to survive separately if managed well - whether they make less profit is another issue. When governments get involved, though, other things than profit matter. In some cases it is good, but rarely in aviation business.
 
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nordikcam
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 11:47 am

Flanker7 wrote:
French minister Le Maire en dutch counterpart Hoekstra have cleared the air between them. Both party's said that they have the same intentions making AF/KL the best airline in the world. We can all go to sleep now.


So everything is going well Madame la Marquise ... Francophones will know what I mean ... and Mr. Smith remains with his plan that wanted to strengthen AF and CDG. The result will not be as flexible as we want to believe!
 
JBH
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 12:31 pm

Flanker7 wrote:
French minister Le Maire en dutch counterpart Hoekstra have cleared the air between them. Both party's said that they have the same intentions making AF/KL the best airline in the world. We can all go to sleep now.


To me, as I have said before, this whole thing was no surprise to the French government. They knew this was coming. A reporter on a Dutch radio channel (BNR) this morning said: ‘the French government had to react in an angry way for the public, to not lose face’. Dutch politicians might be good but turning an angry French minister into a happy one in 1.5 hours is not possible. But, again, just my opinion.
 
Flanker7
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 1:53 pm

JBH wrote:
Flanker7 wrote:
French minister Le Maire en dutch counterpart Hoekstra have cleared the air between them. Both party's said that they have the same intentions making AF/KL the best airline in the world. We can all go to sleep now.


To me, as I have said before, this whole thing was no surprise to the French government. They knew this was coming. A reporter on a Dutch radio channel (BNR) this morning said: ‘the French government had to react in an angry way for the public, to not lose face’. Dutch politicians might be good but turning an angry French minister into a happy one in 1.5 hours is not possible. But, again, just my opinion.


Could be the case but at least the can move forward now. So many things said and speculated about and we have no idea what went on behind the scenes. Let's just hope that things calm down a bit.
Flying blue only if possible
 
Curiousflyer
Posts: 550
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 7:31 pm

De-merging and re-merging is a waste of time and money, although it makes happy bankers, lawyers and journalists. The shareholders should stop bickering and agree on a strategy that results in progress for all parties. Both airlines have made strides lately, AF have streamlined their operations, KL have established a strong business model, however they are much stronger together. 2019 would be a great year if we could see less drama and more revenue and profit growth.
 
Amsterdam
Posts: 386
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 7:53 pm

Curiousflyer wrote:
De-merging and re-merging is a waste of time and money, although it makes happy bankers, lawyers and journalists. The shareholders should stop bickering and agree on a strategy that results in progress for all parties. Both airlines have made strides lately, AF have streamlined their operations, KL have established a strong business model, however they are much stronger together. 2019 would be a great year if we could see less drama and more revenue and profit growth.


The problem is, these are words
These words are said for many years now.
Staff costs at AF are significantly higher than at BA and LH.
IAG just posted a 3,4 million profit.

AF made around 250 million euro profit in a amazing year for commercial aviation and a next crisis will come sooner or later.

There is no magical plan for AF that can significantly increase their profits while keeping the same cost base.

Besides that, competition will increase even more every year.

If there was a magical plan it would have already been performed.
 
Dieuwer
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Re: Dutch government increases stock holding in KL-AF group.

Fri Mar 01, 2019 8:17 pm

Amsterdam wrote:
Curiousflyer wrote:
De-merging and re-merging is a waste of time and money, although it makes happy bankers, lawyers and journalists. The shareholders should stop bickering and agree on a strategy that results in progress for all parties. Both airlines have made strides lately, AF have streamlined their operations, KL have established a strong business model, however they are much stronger together. 2019 would be a great year if we could see less drama and more revenue and profit growth.


The problem is, these are words
These words are said for many years now.
Staff costs at AF are significantly higher than at BA and LH.
IAG just posted a 3,4 million profit.

AF made around 250 million euro profit in a amazing year for commercial aviation and a next crisis will come sooner or later.

There is no magical plan for AF that can significantly increase their profits while keeping the same cost base.

Besides that, competition will increase even more every year.

If there was a magical plan it would have already been performed.


The "magical plan" is called "Kindergarten Math": Revenue - Expenses = Profit. You spend more money on French salaries than the entire group revenue? You lose.

Image

https://www.economist.com/business/2018 ... its-unions
https://www.bloomberg.com/opinion/artic ... the-mirror
 
Lewton
Posts: 103
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Re: Dutch government increases stock holding in KL-AF group.

Sat Mar 02, 2019 6:36 am

Curiousflyer wrote:
De-merging and re-merging is a waste of time and money, although it makes happy bankers, lawyers and journalists. The shareholders should stop bickering and agree on a strategy that results in progress for all parties. Both airlines have made strides lately, AF have streamlined their operations, KL have established a strong business model, however they are much stronger together. 2019 would be a great year if we could see less drama and more revenue and profit growth.

Why are they much stronger together?
 
factsonly
Posts: 2700
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Re: Dutch government increases stock holding in KL-AF group.

Sat Mar 02, 2019 7:55 am

Dieuwer wrote:

Image



This highlights the AF/KL issue clearly, as the breakdown between AF and KL is as follows:

- AF Profit Margin in 2018 = 1.7%
- KL Profit Margin in 2018 = 9.8% (well above IAG and LH Group)
 
18wheelers
Posts: 2
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Re: Dutch government increases stock holding in KL-AF group.

Sat Mar 02, 2019 4:08 pm

Putting aside the usual french/dutch bashing, there is something I still don’t get.

We are being told by french specialized medias that, unlike CDG, AMS is close to being full with no remaining slot capacity.

The supposed strategy was to transfer activity to KLM for financial purposes of course (sounds logical considering crazy french labor taxes and constant increase of CDG taxes as well), but also before reaching AMS maximum capacity so as to have a greater number of slots. Then, growth would be oriented towards the french counterpart.

Now I read that the Dutch government wants to garantee that KLM will continue its growth and that activity won’t be transferred to CDG...

What’s the real situation in AMS ? Is there still available slot for potential growth of KLM ? Any plan for a new runway or new terminal in the near future ?

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