Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

 
kl911
Topic Author
Posts: 3981
Joined: Mon Jul 21, 2003 1:10 am

Troubles At Air France - KLM Getting Bigger?

Wed Jan 28, 2015 10:26 pm

First of all, I don't like either AF or KL to suffer, and I'm a proud Skyteam member. But.... The fact that the Dutch parliament had an official debate about the status of KLM within the AF/KL group raised my hairs.
Is the situation so bad, is there something we don't know?

The main issues:

- AF wanted control of KL finances. This has now been confirmed as not happening, but The Dutch government was worried that KL cash would be used to cover AF's losses.
- KL/AMS airports is a huge economic power in NL. Indirect both employ up to 400.000 people. The government is worried about AF/KL going bankrupt.
- Dutch parliament was seriously talking about having finances ready to bail out / buy out KLM if things go wrong. Government said there is A. no money and B. its legally not possible.

This is all blabla, but my concern is that something is going so wrong that a normally calm/neutral government needed to officially discuss this. IIRC this is the first time the government has open discussions/objections about AF/KL since the merger.

Your thoughts?


Info in English : http://www.nltimes.nl/2015/01/28/klm...ep-control-finances-cabinet-talks/

[Edited 2015-01-28 14:28:29]
 
User avatar
lesfalls
Posts: 3414
Joined: Fri Dec 06, 2013 11:58 pm

RE: Troubles At Air France - KLM Getting Bigger?

Wed Jan 28, 2015 10:37 pm

KLM is making profit while (of course) AF isn't. I would like KLM to brake up with AF. Then KLM could grow much more because AF is restricting them and making alit of routes go through CDG. Also overall KLM offers a much better product (short haul ) then AF so from my point of view I think it will happen.
Lufthansa: Einfach ein bisschen besser.
 
kl911
Topic Author
Posts: 3981
Joined: Mon Jul 21, 2003 1:10 am

RE: Troubles At Air France - KLM Getting Bigger?

Wed Jan 28, 2015 10:42 pm

T be honest, KLM is only in such a good shape because of the initial AF investments after the merger. I don't see a legal way for them to separate. AF/KL group is the only one who can decide this, and why would they let a cash cow go voluntarily ? The Dutch government has only a 5.9% share in the group.
 
BlueDanube
Posts: 32
Joined: Thu May 03, 2012 5:12 pm

RE: Troubles At Air France - KLM Getting Bigger?

Wed Jan 28, 2015 11:40 pm

Quoting kl911 (Reply 2):



You hit the nail on the head. AF/KL is the only entity that can decide. Having said that, they can either spin off KLM into a seperate venture, or sell them to a 3rd party for cash. There's a fair price for KL and should someone make a good offer to AF/KL, there's no reason to think that management wouldn't listen.
 
Joost
Posts: 1877
Joined: Wed Apr 20, 2005 8:27 pm

RE: Troubles At Air France - KLM Getting Bigger?

Wed Jan 28, 2015 11:47 pm

Quoting lesfalls (Reply 1):
Then KLM could grow much more because AF is restricting them and making alit of routes go through CDG

KLM has experienced historic growth ever since the merger/acquisition. Yes they have ceased some routes right after the merger (CCS, SSG/DLA), but so did AF (CGK).

Since 2004, KLM has added many (long-haul) destinations, and most of them aren't served by AF or weren't at the time of opening: FUK, HGH, XMN, CTU, DPS, YYC, YEG, DFW, PTY, EBB, KGL, LUN, HRE (ceased again); and that's next to estabilished AF destinations (LAD, GIG, EZE, SCL).
 
kl911
Topic Author
Posts: 3981
Joined: Mon Jul 21, 2003 1:10 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 12:10 am

Quoting Joost (Reply 4):
Since 2004, KLM has added many (long-haul) destinations, and most of them aren't served by AF or weren't at the time of opening: FUK, HGH, XMN, CTU, DPS, YYC, YEG, DFW, PTY, EBB, KGL, LUN, HRE (ceased again); and that's next to estabilished AF destinations (LAD, GIG, EZE, SCL).

But.... give credit to AF. Without AF KLM would have been dead at that time of the merger.

Right now it's a company with a young fleet ( RIP MD11 and Fokker ) and making money. I often curse French unions and AF, but reality is, KLM would not be the oldest airline in the world today without them. On the other hand. It's 2015, 11 years after the merger things look different, the opposite maybe. I am a armchair CEO, but it looks weird to me and investors, to have an airline transferring many parts of the company to AF at CDG while knowing the KLM /Dutch way works better and makes money. It's one group, why not transfer departments to AMS?

I know the reason is French unions, but how far can unions go in destroying a company?
 
DDR
Posts: 1736
Joined: Sat Sep 28, 2013 11:09 pm

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 12:22 am

Quoting kl911 (Reply 5):

I never knew that KLM was on its death bed. So are you saying that KLM would have went bankrupt and would be out of business if AF had not acquired them?
 
AA737-823
Posts: 5515
Joined: Wed Mar 01, 2000 11:10 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 12:23 am

Quoting kl911 (Thread starter):
buy out KLM

Best possible option, in my unsolicited opinion. While things at the merger were different than they are now, this is going to become a future "classic example" of what's wrong with the airline mega-mergers; they're a band aid. They solve some immediate problems, by kicking the can further down the road.
Now you've got a situation where an arrangement that was intended to streamline two businesses and reap the cost savings benefits is actually dragging one of the two of them down.

Quoting kl911 (Thread starter):
Government said there is A. no money and B. its legally not possible.

Where there's a will, and hundreds of thousands of jobs involved, there's most definitely a way.
 
kl911
Topic Author
Posts: 3981
Joined: Mon Jul 21, 2003 1:10 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 12:37 am

Quoting DDR (Reply 6):
I never knew that KLM was on its death bed. So are you saying that KLM would have went bankrupt and would be out of business if AF had not acquired them?

Yep, not immediately, but after the failed merger attempts with AZ and BA that was the case. Old fleet, no cash, and most importantly, no credit to get cheap leases/orders. AF did help them in this case.
 
DDR
Posts: 1736
Joined: Sat Sep 28, 2013 11:09 pm

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 1:16 am

Quoting kl911 (Reply 8):

Thanks for the info. I had no idea that Big Blue was in so much trouble.
 
User avatar
lesfalls
Posts: 3414
Joined: Fri Dec 06, 2013 11:58 pm

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 1:17 am

Quoting kl911 (Reply 2):

That is true but there is so much more space for KLM to expand. Take for example a look at their American operations. They barley serve North America while AF has the whole market.
Lufthansa: Einfach ein bisschen besser.
 
Nola
Posts: 381
Joined: Thu May 29, 2014 1:40 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 1:30 am

Quoting lesfalls (Reply 10):

That is true but there is so much more space for KLM to expand. Take for example a look at their American operations. They barley serve North America while AF has the whole market.

AF-KL-DL-Alitalia are in a joint venture for North America flights, so it doesn't matter to KL or AF which carrier's metal is used (except for LHR-to-USA, where the JV is only DL-Virgin Atlantic).
 
kl911
Topic Author
Posts: 3981
Joined: Mon Jul 21, 2003 1:10 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 1:58 am

Quoting Nola (Reply 11):
AF-KL-DL-Alitalia are in a joint venture for North America flights, so it doesn't matter to KL or AF which carrier's metal is used (except for LHR-to-USA, where the JV is only DL-Virgin Atlantic).

True, and KLM has many Asian destinations that AF doesn't has.
 
prebennorholm
Posts: 7129
Joined: Tue Mar 21, 2000 6:25 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 3:05 am

Quoting kl911 (Reply 2):
The Dutch government has only a 5.9% share in the group.

I wonder from where you get those 5,9%. The Air France-KLM financial reports tell that the French government has a 15.9% stake in Air France-KLM, and the rest is owned by private investors (institutional investors some 58%, staff 7% etc).

Air France and KLM are both 100% owned subsidiaries of the holding company Air France-KLM.

Nowhere is it mentioned that the Dutch government owns anything.

Quoting kl911 (Reply 2):
I don't see a legal way for them to separate. AF/KL group is the only one who can decide this, and why would they let a cash cow go voluntarily ?

  

The Dutch government can go and buy 51% of the Air France-KLM stocks. Then they can in principle do whatever they want (except for EU laws for protecting minority stockholders' interests).
Always keep your number of landings equal to your number of take-offs
 
User avatar
Buyantukhaa
Posts: 2331
Joined: Thu May 13, 2004 5:33 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 9:46 am

Quoting prebennorholm (Reply 13):
I wonder from where you get those 5,9%

For example in recent questions asked by parliament:

Quote:
De Nederlandse Staat houdt een belang van 5,9% in KLM. De Nederlandse stichtingen SAK I en
SAK II hebben samen 44,2% (32,9 11,3) van de KLM aandelen en 0,9% is in handen van particuliere beleggers. Derhalve is 51% in Nederlandse handen. De overige 49% is in handen van de holding Air France KLM. De stichtingen SAK I en SAK II oefenen niet direct namens de Nederlandse staat invloed uit op KLM, maar zijn alleen van belang in het kader van het veilig stellen van de landingsrechten van KLM. Het aandeelhouderschap voor de Nederlandse Staat binnen de holding Air France KLM geeft op zich zelf dus weinig invloed.

The Dutch state keeps a 5,9% share in KLM. The Dutch foundations SAK I and SAK II together have 44,2% (32,9 11,3) of KLM shares and 0,9% is owned by private shareholders. The remaining 49% is owned by the Air France KLM holding company. The SAK I and SAK II foundations do not directly exert influence on KLM on behalf of the Dutch state, but are only of interest for the sake of securing the landing rights of KLM. The Dutch state being a shareholder within the Air France KLM holding does in itself not give a lot of influence.

[Edited 2015-01-29 02:33:36]
I scratch my head, therefore I am.
 
User avatar
usdcaguy
Posts: 1564
Joined: Mon Jan 26, 2004 12:41 pm

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 1:51 pm

While I do support KLM retaining its identity and own ability to generate cash, AF/KL merged years ago and are a very strong company together. Air France's difficulties primarily stem from the degree of competition from other carriers at CDG and having a very high cost base (French staff are very expensive, although they have every right to the conditions they have won in bargaining). If AF needs money for capital projects or operating expenses, there is no reason why KL should not be able transfer money to AF. It's not as though the money would simply be burned. If AF were to suffer, KL would suffer along with it because they are one company. There is something horribly Dutch about clinging onto cash and worrying that others will get their grubby hands on it.
 
kl838
Posts: 178
Joined: Fri Oct 29, 2010 6:22 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 2:09 pm

What I don't understand is why is there always speculation that the company is going to shut down tomorrow? They haven't reached that point yet, sure it has been a tough few years, but that was partly due to previous management deciding to fit a very substandard product in the AF division. As a primarily premium airline, AF needs to fight the Middle Eastern airlines head on, they missed their opportunity in wowing the consumer when they launched the A380 a few years ago.

The substandard product, along with the Flying Blue "enhancements" sent all the elite members and loyal customers away into the hands of the competition. Yet if you read the response from the new products on the newly fitted AF and KL jets, it has been very positive. This has led to a lot of frequent flyers waiting till all jets are equipped before booking flights with both airlines. One of their biggest mistakes besides on board product, was not anticipating the rise of low cost carriers, and the need to streamline the group quickly. The board has to constantly plan ahead and forecast what the competition or industry might throw at them.

They also don't operate as completely separate companies, there are so many operations behind the scenes that have been formed into one to cut out excess costs to the firm. Sure KLM is a subsidiary, but they both are under the AF-KL Group, it is their decision and not the Dutch government as to what is better for the firm. Otherwise KLM should have just remained under the government and not been privatised.
 
anstar
Posts: 3313
Joined: Sun Nov 23, 2003 3:49 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 3:10 pm

Quoting kl838 (Reply 16):
They also don't operate as completely separate companies, there are so many operations behind the scenes that have been formed into one to cut out excess costs to the firm

But there is so much more they could do. I mean IAG are modifiying their A320's so they can be easily transferred between airlines within days.... things from galleys to the flight deck are being harmonised. (removing 4th jumpseat on some aircraft).

AFKL have a long way to go - but they could be doing more consolidation in the background.
 
kl838
Posts: 178
Joined: Fri Oct 29, 2010 6:22 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 3:38 pm

Quoting anstar (Reply 17):
But there is so much more they could do. I mean IAG are modifiying their A320's so they can be easily transferred between airlines within days.... things from galleys to the flight deck are being harmonised. (removing 4th jumpseat on some aircraft).

AFKL have a long way to go - but they could be doing more consolidation in the background.

That is absolutely true, if I was the management of the board I would try and harmonise as much as possible, and if anything try and shift certain operations to the Netherlands. I still sometimes wonder if establishing their headquarters in Paris was a wise decision considering the Netherlands being a much more business friendly market. The strike last year showed how much power they hold over the airline and is by far one of the biggest problems. France in itself needs a cultural change in doing business, there should be some sort of legal protection against a frivolous strike (like the lufthansa hat strike).
 
Winterapfel
Posts: 29
Joined: Wed Feb 25, 2009 4:35 pm

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 5:37 pm

Quoting usdcaguy (Reply 15):
If AF needs money for capital projects or operating expenses, there is no reason why KL should not be able transfer money to AF. It's not as though the money would simply be burned.

From what I understood from Dutch media, there is actually an issue here.
Example: The Dutch work force doesn't strike that often. In France this is more of a habit. The last Air France strike has cost AF-KLM quite a bit of money. Would KLM need to contribute to this "French issue"? In Nlw there was no strike since, although there where hard discussion", KLM and labor organizations worked it out without strike...

Difficult to decide on!
 
dank
Posts: 935
Joined: Thu Jul 20, 2006 11:35 am

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 6:46 pm

Quoting lesfalls (Reply 1):
KLM is making profit while (of course) AF isn't. I would like KLM to brake up with AF. Then KLM could grow much more because AF is restricting them and making alit of routes go through CDG. Also overall KLM offers a much better product (short haul ) then AF so from my point of view I think it will happen.

From what I understand this is mostly an accounting trick to minimize tax burden. Per KPMG, the business tax rate in France is 33.3% and in the Netherlands it is 25%. This is similar to the types of tricks that most multinationals use when possible. It's, I believe, one of the reasons that this merger was attractive to AF (KLM was in a poorer position than AF at the time of the merger).
 
SelseyBill
Posts: 713
Joined: Wed Jul 17, 2013 7:38 pm

RE: Troubles At Air France - KLM Getting Bigger?

Thu Jan 29, 2015 10:37 pm

Quoting lesfalls (Reply 1):
KLM is making profit while (of course) AF isn't. I would like KLM to brake up with AF. Then KLM could grow much more because AF is restricting them and making alit of routes go through CDG. Also overall KLM offers a much better product (short haul ) then AF so from my point of view I think it will happen.

I maintain to this day that KLM/ BA is a much better marriage for both.

I'd like to see KLM and AF split, with KLM joining OW. Much better fit for both, with BA being able to use KLM to feed the UK regions to the world via AMS. BA were very short-sighted at the time of the much discussed BA/KLM tie up, in seeking to channel everything via LHR. The ME3 have exploited BA's weakness in the UK regional market, and KLM would be the perfect solution for BA, in the same way EI is likely to be on TATL for IAG.

Unlikely to happen I know, but BA seems a much better partner strategically for KLM than AF is.
 
bobnwa
Posts: 4514
Joined: Fri Dec 22, 2000 12:10 am

RE: Troubles At Air France - KLM Getting Bigger?

Fri Jan 30, 2015 3:02 pm

Quoting lesfalls (Reply 10):
That is true but there is so much more space for KLM to expand. Take for example a look at their American operations. They barley serve North America while AF has the whole market

Let me just say that statement is full of you know what.
 
LFutia
Posts: 3159
Joined: Sun Dec 08, 2002 11:04 am

RE: Troubles At Air France - KLM Getting Bigger?

Sat Jan 31, 2015 3:06 am

Quoting lesfalls (Reply 10):
That is true but there is so much more space for KLM to expand. Take for example a look at their American operations. They barley serve North America while AF has the whole market.

For this, they have Delta to cover what they cannot cover.

Leo/ORD
Leo/ORD

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos