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LHRFlyer
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IAG CEO: BA Should Have Merged With KLM

Wed Apr 13, 2016 7:45 pm

Interesting comments by IAG CEO Willie Walsh (reported by Bloomberg) on the proposed merger between BA and KLM in 2000 which was, in his words, "a deal that should have been done."

Had the merger between BA and KLM happened, AMS would have effectively become LHR's third runway. Though with DUB due to gain a new runway and Aer Lingus growing its presence in UK regional airports, it's likely this role will be assumed by DUB.

As WW says, it's unlikely that KLM would split from AF, but it's noteworthy in itself that the possibility of a split been the two airlines has been raised.

http://www.bloomberg.com/news/articl...b-as-u-s-airports-court-aer-lingus

Quote:
Walsh, who formed IAG through a merger of British Airways with Spain’s Iberia before purchasing British Midland, Vueling and Aer Lingus, said there’s plenty of scope for further consolidation in Europe and that more activity is likely even with the low oil price propping up some weaker carriers.

The CEO said turmoil at Air France-KLM Group, where CEO Alexandre De Juniac is leaving after failing to extract cost cuts from pilots, is unlikely to cause a split between its French and Dutch arms, while describing a merger with KLM that was pursued by BA in 2000 as “the one deal that should have been done.”

KLM hasn’t been tainted by its French partner’s issues, and would generate interest “within Europe and outside” should it ever come to market, he said, though the Amsterdam-based business is now deeply integrated with Air France so that it’s “unclear” if the two could ever be separated.
 
kiwiandrew

RE: IAG CEO: BA Should Have Merged With KLM

Wed Apr 13, 2016 8:19 pm

BA had multiple opportunities with KL, and blew them by consistently undervaluing the airline. In the end they drove KL into the arms of AF and Skyteam, a mistake they repeated later with Swiss, pushing them to LH and Star ( after they had already signed up as a future oneworld carrier). I am sure today's IAG management and shareholders regret the opportunities missed due to the arrogance and intransigence of BA management in that period.
 
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RE: IAG CEO: BA Should Have Merged With KLM

Wed Apr 13, 2016 8:24 pm

While BA and KL would no doubt complement each other very nicely, with KL's larger presence in secondary Asian markets and their massive UK network, I can't help but feel that this is slightly revisionist thinking. KLM in the early 2000s was a bloated, inefficient, and loss making airline, and frankly BA wasn't much better. While Rod Eddington was a successful CEO, and seems like a genuinely nice guy, he didn't have the nerve to stare down the unions, leaving that flight to his successor. I have no doubt that the KLM and BA of 2016 would go together like a hand in a glove, but had they merged 15 years ago it wouldn't have been anywhere near as smooth. JMO.
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RE: IAG CEO: BA Should Have Merged With KLM

Wed Apr 13, 2016 8:58 pm

Quoting kiwiandrew (Reply 1):
BA had multiple opportunities with KL, and blew them by consistently undervaluing the airline. In the end they drove KL into the arms of AF and Skyteam, a mistake they repeated later with Swiss, pushing them to LH and Star ( after they had already signed up as a future oneworld carrier). I am sure today's IAG management and shareholders regret the opportunities missed due to the arrogance and intransigence of BA management in that period.

If I recall BA was very much of the mindset that "we would be acquiring you" whilst KL was looking for a merger. I know that bilaterals, etc, would have meant that a holding group structure (like later emerged with IAG or AF-KL) would have been set up, but BA management wanted to run the show.

I agree that BA repeated that mistake with LX. Things got a bit further along, including BA acquiring a number of LX's slots (LX withdrew from GVA-LHR) and it was only the ability of LH to transfer some from BD that allowed LX to return to that market.

Quoting RyanairGuru (Reply 2):
While BA and KL would no doubt complement each other very nicely, with KL's larger presence in secondary Asian markets and their massive UK network, I can't help but feel that this is slightly revisionist thinking.

It wouldn't have been smooth but it should be remembered this was before AA/BA got ATI so it would have been a good move for BA on the North Atlantic. If BA could have got in on the KL/NW alliance then whilst NW was Gatwicked, I'd have thought BA would have upped frequency on LHR-DTW and I think under Bermuda II they could have launched LHR-MSP. NW would have also been a good feed for BA at LGW (the network, whilst down from its peak, was still quite big at this time).

I'm assuming NW would have looked to move to oneworld because the KL/NW tie-up was so in depth. Of course that opens up a revisionist history as to what could have happened if AA/NW had merged.


Personally, whilst BA/KL would have been good I think that given how things have panned out in Europe over the last 15 years LX is the carrier IAG could really have done with. Not just from the fact that ZRH can support good loads up front but it would have given oneworld a Central/Eastern European presence that it lacks. LH/LX/OS/LO have that pretty much locked up for Star.

In the 1990s it was regulation that stopped BA doing the deals it wanted (KL, SN, UA, CO, AA). The best they managed was the 25% stake in USAir, but the application in 1996 to do the JV with AA killed that. In the early 2000s it could be said that it was BA arrogance that stopped the deals (KL, LX). Now things have turned round. To some extent at the time BA/IB (creating IAG) could have been viewed as a shotgun wedding (in reaction to LH's moves and AF/KL), but the turnaround at IB, the addition of VY and now EI has made IAG the strongest of the European groupings. If they could add AY then they'd have a pretty good grouping.
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SelseyBill
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RE: IAG CEO: BA Should Have Merged With KLM

Wed Apr 13, 2016 9:04 pm

Quoting LHRFlyer (Thread starter):
Walsh, who formed IAG through a merger of British Airways with Spain’s Iberia before purchasing British Midland, Vueling and Aer Lingus, said there’s plenty of scope for further consolidation in Europe and that more activity is likely even with the low oil price propping up some weaker carriers. The CEO said turmoil at Air France-KLM Group, where CEO Alexandre De Juniac is leaving after failing to extract cost cuts from pilots, is unlikely to cause a split between its French and Dutch arms, while describing a merger with KLM that was pursued by BA in 2000 as “the one deal that should have been done.”

This is ten year old news.

A BA/KLM tie-up seemed to be something that both airline staffs wanted below board level; if just seemed brain-dead arrogant thinking by the BA board stopped in happening. Eddington et al seemed to look at KLM as a 'Heathrow feeder/ reliever' operation, rather than AMS becoming the perfect conduit for developing world travel for BA from the UK regions.

I'm certain the ME3 would not be enjoying the success it is in the UK, if BA had married KLM.
 
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 12:01 am

KLM would have been far better at BA then it is at Air France. KLM has become a like AF's poor cousin. The new J class in the 747-400 has a very strange configuration. The product innovation just doesn't seem to be there. One has to wonder of AF is making KLM "less" so it can be "more" ? AF new J class sears would have been great at KLM on the 777 & 744 too, even though the 787 at KLM has AF j class seats.
 
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 12:55 am

If current trends such as the exponential growth of EK and FR etc continue then taking a long term view, I don't think it's beyond the realms of possibility that in say 10-15 years' time the Big 3 legacy network groups (IAG, LH Group, AF-KLM) will consolidate into two, or perhaps even one airline group.

This could happen in a number of ways with IAG taking over either AF-KLM or LH Group or AF-KLM being split between IAG and LH Group.
 
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 2:41 am

Quoting kiwiandrew (Reply 1):
BA had multiple opportunities with KL, and blew them by consistently undervaluing the airline.
Quoting SelseyBill (Reply 4):

A BA/KLM tie-up seemed to be something that both airline staffs wanted below board level; if just seemed brain-dead arrogant thinking by the BA board stopped in happening. Eddington et al seemed to look at KLM as a 'Heathrow feeder/ reliever' operation, rather than AMS becoming the perfect conduit for developing world travel for BA from the UK regions.
Quoting jfk777 (Reply 5):
KLM would have been far better at BA then it is at Air France.

  
Sooooo much truth here. BA just wasn't able to see KLM as a peer rather than a vassal. Compare to how today WW seems to take care to support the posturing of BA, IB and EI as peers. Too bad that KL is now in a bad marriage that it can't easily walk away from.

Quoting jfk777 (Reply 5):
KLM has become a like AF's poor cousin.

Poor, yet is the one that is bringing in the profits, no?

KLM seems to be the responsible partner in the relationship trying to prop up the irresponsible AF.
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 7:18 pm

Quoting LHRFlyer (Reply 6):
This could happen in a number of ways with IAG taking over either AF-KLM

Considering the respective market capitalisations, 14 billions EUR for IAG vs 2.5 billions EUR for AF-KL, it wouldn't actually be that difficult for IAG to take-over the AF-KL (political considerations apart).
 
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 7:49 pm

Quoting tomcat (Reply 8):
Considering the respective market capitalisations, 14 billions EUR for IAG vs 2.5 billions EUR for AF-KL, it wouldn't actually be that difficult for IAG to take-over the AF-KL (political considerations apart).

Or even KL only if AF needs the cash, and attempts an unwind of sorts.
 
ytz
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 9:32 pm

They should trade. IB + cash for KL.
 
Pihero
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 9:48 pm

Typoical idiotic anti- French thread, without any knowledge of what's at stake.
Yes, BA had apossible access to KLM, which they blew up spectacularly for their arrogance and their contempt of the perceived *clogs*
What happened was the clogs and the frogs ended up being together...
...and the clogs are doing a lot better than they used to.

What the usual short-sighted French-basher on the forum doesn't see is that KLM has grown a lot quicker than AF, and for some very good reasons : the tax comparison on both sides and the suicidally foolish game the french unions are playing... Remember, the original plan was a flat 1/3 vs 2/3 of the traffic / benefits ... for both airlines... Right now it's more like progressing toward 45 / 55% ... Who's got the new planes first ?... who's taking most of the benefits of Transavia in Europe ?...

Quoting ytz (Reply 10):
They should trade. IB + cash for KL.

... and of course, Iberia isn't worth a damn.... This amount to something close to racism in this forum.
But we've seen worse, unfortunately.

[Edited 2016-04-14 15:14:22]
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TurnaroudUK
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 10:12 pm

The next purchase for IAG should be AY, although KL would be very helpful for their route structure.
 
ZeeZoo
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 11:15 pm

Quoting Pihero (Reply 11):

... and of course, Iberia isn't worth a damn.... This amount to something close to racism in this forum.
But we've seen worse, unfortunately.

That's rich coming from the Frenchie who bashes India on the Rafale thread in the Military Forum (deal which has just been completed according to insider sources).

And French people aren't a race, it's xenophobia or "Francophobia".
 
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 11:24 pm

Shoulda-woulda-coulda. In the US alone there are many such scenarios.

US buys Ozark and PSA, instead of PSA and Piedmont.

TWA buys Piedmont. Or Western. Or Eastern on their death-throws.

Texas International succeeded in the National bidding, then buys BN's Latin American routes 3 years later.

Piedmont buys Pan Am, post PA Pacific Division sale to UA.

AA buys PA's Pacific division.

Northwest buys Western.

Continental and Eastern, pre-Lorenzo.

American buys the original Frontier.

That whole Pan Am/Northwest deal that almost came to be.

Alaska and AirCal.

United and PeoplExpress. Might as well, they have EWR now the long way.

Republic does not buy Hughes Airwest (which they basically dismantled) and buys Air Florida instead.

Eastern and Braniff were THIS close to merging at one point.

USAir and Southern.

Piedmont and Southern.

Ozark and Southern.

And on and on and on....
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kdhurst380
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RE: IAG CEO: BA Should Have Merged With KLM

Thu Apr 14, 2016 11:27 pm

Quoting Pihero (Reply 11):

Typoical idiotic anti- French thread, without any knowledge of what's at stake.
Yes, BA had apossible access to KLM, which they blew up spectacularly for their arrogance and their contempt of the perceived *clogs*
What happened was the clogs and the frogs ended up being together...
...and the clogs are doing a lot better than they used to.

What the usual short-sighted French-basher on the forum doesn't see is that KLM has grown a lot quicker than AF, and for some very good reasons : the tax comparison on both sides and the suicidally foolish game the french unions are playing... Remember, the original plan was a flat 1/3 vs 2/3 of the traffic / benefits ... for both airlines... Right now it's more like progressing toward 45 / 55% ... Who's got the new planes first ?... who's taking most of the benefits of Transavia in Europe ?...

Gosh, you really have a bee in your bonnet, haven't you?

Just because the British & Irish have nailed it doesn't make it a direct attack on the French! Take a leaf out or forever ride on that air of superiority hoping it might get you somewhere.
 
jetwet1
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 5:51 am

Quoting Pihero (Reply 11):
This amount to something close to racism in this forum.

Really, i'm seeing a lot of British bashing in this thread, throw in a little French bashing and a general love fest for the Dutch and there really isn't any "racism", just some pretty clear dialogue IMHO.

Anyways, would KLM have been better with BA, probably, the thing is though, would BA have allowed KLM to keep growing it's long haul, or would they have turned KLM into a shuttle service into LHR to feed the BA long haul routes ?
 
SCQ83
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 6:02 am

I can see IAG + KL and LH + AF.

I reckon the main issue is regulatory competition issues in the LH/AF side. In that case, the largest carrier in Germany, France, Belgium, Switzerland and Austria (which is a geographic continuum) would belong to the same group.

But Germany+France makes sense IMO. There are already shared services between those countries in other methods of transportation (i.e. Thalys Germany-Belgium/Netherlands-France) so that could help to increase that convergence.
 
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frigatebird
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 7:12 am

Quoting FlyCaledonian (Reply 3):
If I recall BA was very much of the mindset that "we would be acquiring you" whilst KL was looking for a merger. I know that bilaterals, etc, would have meant that a holding group structure (like later emerged with IAG or AF-KL) would have been set up, but BA management wanted to run the show.

Correct. The KLM brand would have ceased to exist, become something like Brotish Airways Netherlands or so, but the aircaraft wouldn't be recognizable from the other British Airways planes. That was not acceptable for KL.

Quoting SelseyBill (Reply 4):
Eddington et al seemed to look at KLM as a 'Heathrow feeder/ reliever' operation, rather than AMS becoming the perfect conduit for developing world travel for BA from the UK regions.

And this would have meant AMS would be relegated to being just a regional airport, costing at least thousands of jobs. And this was of course unacceptable for Dutch government.

Quoting Revelation (Reply 7):
Too bad that KL is now in a bad marriage that it can't easily walk away from.

AF is not doing well and cannot reform with unions that fail to see reality. The big risk is that AF is going down completely and will take KL with them. But it's not that the AF marriage has been bad for KL, they were able to grow and make profits again, which wouldn't have been possible as stand alone carrier. Nowadays, KL might be better off as part of the IAG group, retaining its own identity, like IB. But I'm not so sure BA would have allowed KL the same growth.

AF and KL can be separated, but it's going to be mighty complicated.
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 7:21 am

Quoting SCQ83 (Reply 17):
But Germany+France makes sense IMO. There are already shared services between those countries in other methods

there are also shared ICE Services between FRA and AMS but that or the thalys is no role model for aviatiom. AF is , as usual, heavily influenced by the French state, LH is not influenced by the German state. LH and AF don't fit and that won't happen.

KL and BA would be a splendit Union, but IMHO it is too late for splitting up AF and KL.
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mrv85
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 8:31 am

Quoting Pihero (Reply 11):
What the usual short-sighted French-basher on the forum doesn't see is that KLM has grown a lot quicker than AF, and for some very good reasons

I agree with that statement. I am afraid that KLM (and AMS for that matter) wouldn't be anywhere near its current size had they been acquired by BA back then.

The deal with AF has allowed KLM to be both somewhat independent (most likely more than in a deal with BA) and to grow significantly, fuelled by both AF's strenghts and weaknesses.

I must admit that when the deal was announced, I expected KLM (and AMS) to be completely downscaled by AF and even feared for the KLM name to dissapear.

Allthough the ride may have been and most likely will be rocky, I dare to say that (up untill now), the acquisition of KLM by AF has proven to be a better alternative compared to a acquisition by BA or a standalone future (let's not forget the financial difficult situation in which KLM was slipping into pre the AF deal).

Whether AF is the right partner for KLM in the next decade is a question I cannot answer (and perhaps not relevant unless AF think it is a relevant question to aks).
 
flyinghippo
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 9:32 am

Quoting SCQ83 (Reply 17):
I can see IAG + KL and LH + AF.

If AF/KLM gets split up, KL marries IAG and AF goes with LH Group... what would happen to Skyteam?

Would DL move their EU hub to AMS or CDG?

How about KE/CI/MU that has a pretty big investment with KL? Would a bunch of airlines move from Skeyteam to either Star or OneWorld?

It would be the end of Skeyteam.
 
factsonly
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 10:32 am

Quoting SCQ83 (Reply 17):

I can see IAG + KL and LH + AF.

If KLM ever comes up for sale there will be only one buyer......: DELTA AIRLINES.

The KLM and Delta systems and networks are way too integrated, for any other serious option.

So a KLM future, without AF, would be VS+KL under Delta's umbrella.

Forget BA and IAG, way too much overlap between the respective networks to give any added value to an integration!
 
mrv85
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 11:29 am

Quoting factsonly (Reply 22):
If KLM ever comes up for sale there will be only one buyer......: DELTA AIRLINES.

That would be a nice combination allthough I believe certain EU regulations might prevent that.
 
mutu
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 3:37 pm

Having been involved with the airline at the time I recall BOTH the proposed KLM deal and the proposed UA deal fell over due to a lack of regulatory support. At the time there were no EU bilaterals and no support from the USA or other key markets to permit BAKL to happen. In effect KL would HAVE to have been a feeder to BA for non EU flying or vice versa.

A non starter (indeed I am not even sure there was a pure open skies approach within the EU at that time......

Sir Colin Marshall believed that if a big enough marriage was tabled and knocked on the regulators door that in might provoke a revisiting of foreign ownership rules etc....but it didn't. And foreign ownership rules restrictions were far more restrictive then than now even if US rules continue to be extreme.

To no avail. And yes there were secondary issues for sure but they were never worked on for a fix because the regulatory hurdles were never overcome.

Even the creative IAG platform structure would have failed the test back in the day

Examples of other blocked transactions:

In 1989 BA and KLM wanted to jointly acquire 20% stake in Sabena: Blocked by European competition authorities
In 1991 BA arranged with Russian banks to setup a new Russian carrier AIR Russia and BA would take a 31% stake: blocked by Russian regulators.
1992 BA formed DBA with german banks taking 49.9% stake, the maximum it could at the time
Same year acquired 49.9% of TAT, again maximum stake it could take
Then in 1993 took a 19.9% stake in USAir and a 25% stake in Qantas, the max allowed for a foreign carrier at that time

All unravelled one way or another - but they were years ahead in trying to build a global group footprint DESPITE a hostile regulatory framework!!

Its all so much easier today with EU carriers being able to buy 100% of other EU carriers......
 
Egerton
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 3:47 pm

History is usually written by the winners. Hence the title of this thread.

I suspect that IAG will keep accumulating slots at LHR, LGW and LCY as and when they become available at good value. Just now it is not UK slots they are short of, but new generation aeroplanes. Increasing the IAG presence at other UK airports is now in hand, starting with STN and LTN. By the time the 3rd LHR runway arrives, IAG will have a better grip of the UK and Ireland, and be less of a 'London Airways'.

IAG would do well to avoid a purchase of KLM, AF or LH because the politics make for big trouble. IAG will be better to stick to UK, Spain and Ireland for long haul. Finnair is a good airline, but a side show with an unproven long haul strategy. A small side bet on TK might give good value to give IAG a strong entry into ME3 territory, with President Erdogan gone.

The long haul objective of IAG should be profitable growth giving 15% return on capital employed, with happy customers providing repeat business. On short haul, continue the battle for lower total costs, or let VY, FR or U2 do it.

Such a strategy would over time put more distance between the IAG as the leader of the European pack, and the rest. So when the next recession comes along, IAG will have the ability to pick and choose its next bargains.
 
ytz
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 4:54 pm

Quoting Pihero (Reply 11):
... and of course, Iberia isn't worth a damn....

Hence my suggestion that IB would come with cash in such a trade....

I actually see a good bit of synergy between IB and AF, had they merged. They would have been a TATL powerhouse, especially to the Carribean.

Quoting Pihero (Reply 11):
This amount to something close to racism in this forum.

What? I don't get your Euro politics. Suggesting that mergers could have been different is racism? Please explain.
 
factsonly
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 6:14 pm

Quoting mrv85 (Reply 23):
That would be a nice combination allthough I believe certain EU regulations might prevent that.

Sorry........?

Didn't prevent DELTA from getting a fair say in VS at 49%.
 
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Dano1977
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 8:14 pm

Quoting factsonly (Reply 27):

I believe under EU rules. 49% is the maximum shareholding they are allowed to have.

Although there are some on this forum who believe 49% is a controlling majority.
The average EU official - he has the organising ability of the Italians, the flexibility of the Germans and the modesty of the French. And that's topped up by the imagination of the Belgians, the generosity of the Dutch.
 
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caoimhin
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 10:07 pm

Quoting ytz (Reply 26):
Suggesting that mergers could have been different is racism? Please explain.

   It's neither racist nor xenophobic. The racism flag is an odd but not out-of-character bit of defensiveness.

Quoting Dano1977 (Reply 28):
I believe under EU rules. 49% is the maximum shareholding they are allowed to have.

Currently you are correct. But the EC was considering changing the rule at the end of last year. I don't know the current status of that proposal, but it would only allow airlines that comply with to-be-determined standards on state subsidies to hold majority ownership of EU airlines. I think the concern was principally with the ME3. Etihad could, for example, easily acquire full control of Alitalia.

Quoting Dano1977 (Reply 28):
Although there are some on this forum who believe 49% is a controlling majority

Well, it can give you de facto control of a company in many circumstances.
 
MaxxFlyer
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 10:21 pm

Not being that familiar with EU airlines, how easy would it be for KL to get out of AF, and would it survive on it's own? Seems to me mergers are good for stockholders, bad for consumers.
 
LHRFlyer
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RE: IAG CEO: BA Should Have Merged With KLM

Fri Apr 15, 2016 11:37 pm

Quoting MaxxFlyer (Reply 30):
Not being that familiar with EU airlines, how easy would it be for KL to get out of AF, and would it survive on it's own? Seems to me mergers are good for stockholders, bad for consumers.

It is possible in theory. Outside of aviation, lots of industries goes through cycles of mergers and demergers depending on the latest industry trends (scale and diversification versus being small and nimble and focused on core business etc).

However, any decision to demerge KLM from AF rests with the shareholders of AF-KLM. If IAG really wanted KLM there's nothing stopping it from making an offer to AF-KLM. The management of AF-KLM would be required to act in the best interest of their shareholders and give the offer serious consideration.
 
mrv85
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RE: IAG CEO: BA Should Have Merged With KLM

Sat Apr 16, 2016 8:03 am

Quoting factsonly (Reply 27):


Yes, but the way you stated it seemed to imply full ownership ( at least to me), which would not be possible under current regulations.

If delta were to buy 49%, who would own the rest? If that were to be one shareholder they would still effectively control klm.
 
factsonly
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RE: IAG CEO: BA Should Have Merged With KLM

Sat Apr 16, 2016 8:15 am

Quoting mrv85 (Reply 34):
If delta were to buy 49%, who would own the rest? If that were to be one shareholder they would still effectively control klm.

KLM shares (currently AF/KLM) are traded on the stock exchange.
 
mrv85
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RE: IAG CEO: BA Should Have Merged With KLM

Sat Apr 16, 2016 11:38 am

Quoting factsonly (Reply 33):

KLM shares (currently AF/KLM) are traded on the stock exchange.

Yes, but individual klm shares are not, so that does not really solve the issue.

Option could be to float 51% of the klm shares and sell the remaining 49% to dl.
 
speedbird9
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RE: IAG CEO: BA Should Have Merged With KLM

Sat Apr 16, 2016 11:50 am

Quoting mrv85 (Reply 34):

Quoting factsonly (Reply 33):

KLM shares (currently AF/KLM) are traded on the stock exchange.

Yes, but individual klm shares are not, so that does not really solve the issue.

Option could be to float 51% of the klm shares and sell the remaining 49% to dl.

Or get Virgin Atlantic to purchase the remainder? assuming they can as a significantly smaller company acquire the necessary financing without entering bankruptcy and we're discussing hypothetical situations about how this situation could pan out.

[Edited 2016-04-16 04:56:10]
 
mrv85
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RE: IAG CEO: BA Should Have Merged With KLM

Sat Apr 16, 2016 12:19 pm

Quoting speedbird9 (Reply 35):
Or get Virgin Atlantic to purchase the remainder?

Authorities would probably judge such a construct as DL and VS as acting in consort and not accept it.

In addition, like you said, VS would have to attract al lot of additional capital to acquire 51% of KLM. Since not a whole lot of banks would like to finance such a deal.

Best option would be a newco to which AFKL would sell KL and which would be owned for 49% bij DL and the remainder by EU member country based shareholders (who would need to accept the dominant role of DL regarding their investment)

This being said, I still think that KL and AMS could be far worse off and that AF has not been a bad shareholder from a Dutch perspective.
 
delimit
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RE: IAG CEO: BA Should Have Merged With KLM

Sat Apr 16, 2016 1:50 pm

Quoting mrv85 (Reply 32):
If delta were to buy 49%, who would own the rest? If that were to be one shareholder they would still effectively control klm.

The deal would face massive regulatory hurdles and is never going to happen...but 49% is effectively controlling interest unless a single entity owns the remaining 51%.

Quoting ytz (Reply 26):
What? I don't get your Euro politics. Suggesting that mergers could have been different is racism? Please explain.

He's referring to the continual litany of, "poor KLM; stuck with horrible AF," that goes on; when "horrible" AF's problems are a significant reason KL is doing so well. It's the same parent company. How does AF/KL not accrue any credit for KL's success?
 
mandala499
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RE: IAG CEO: BA Should Have Merged With KLM

Sun Apr 17, 2016 2:50 am

Quoting mrv85 (Reply 20):
I am afraid that KLM (and AMS for that matter) wouldn't be anywhere near its current size had they been acquired by BA back then.

It would be if UK airport politics ended up slower than it did...    It was supposed to be a relief valve, but yes, regulatory and mindset hurdles back then!

Quoting mrv85 (Reply 20):
I must admit that when the deal was announced, I expected KLM (and AMS) to be completely downscaled by AF and even feared for the KLM name to dissapear.

Many I mean MANY had that fear! We were pleasantly surprised!

Quoting factsonly (Reply 22):
If KLM ever comes up for sale there will be only one buyer......: DELTA AIRLINES.

And then if Delta says "Etihad stop buying European airlines", Etihad would just laugh!   
49% cap... and you cannot have "effective control" (act as if you're more than 50%) because it's "prohibited" and would provoke an inquiry, much like what EY is being accused of...   
AF-KL needs to find new up and coming powerhouses in Europe they can use... somewhere in the east is probably ideal... as IAG is stuck in the west and LH group in the center...    Oh hang on, this is airlines, not RISK/Domination.   
When losing situational awareness, pray Cumulus Granitus isn't nearby !
 
scotron11
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RE: IAG CEO: BA Should Have Merged With KLM

Sun Apr 17, 2016 8:48 am

Quoting delimit (Reply 37):
He's referring to the continual litany of, "poor KLM; stuck with horrible AF," that goes on; when "horrible" AF's problems are a significant reason KL is doing so well. It's the same parent company. How does AF/KL not accrue any credit for KL's success?

If the AF/KLM combination did not happen...I wonder where AF would be today? Better off or worse off? With the French government still retaining a significant holding there would be no chance of their going bankrupt....but then again that same stakeholding would be an impediment for any takeover of AF itself.
 
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FlyCaledonian
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RE: IAG CEO: BA Should Have Merged With KLM

Sun Apr 17, 2016 5:46 pm

Quoting frigatebird (Reply 18):
Quoting FlyCaledonian (Reply 3):
If I recall BA was very much of the mindset that "we would be acquiring you" whilst KL was looking for a merger. I know that bilaterals, etc, would have meant that a holding group structure (like later emerged with IAG or AF-KL) would have been set up, but BA management wanted to run the show.

Correct. The KLM brand would have ceased to exist, become something like Brotish Airways Netherlands or so, but the aircaraft wouldn't be recognizable from the other British Airways planes. That was not acceptable for KL.

That was not what I was saying. The BA Board wanted KL to be a BA subsiduary (although as I said it would have had to be structured to protect Dutch biltaterals) but I don't think there was ever any suggestion the KL brand would have disappeared. The KL brand was - and is - too strong to just wipe away like that.

As for others saying that KL would have been a feeder carreir for BA at LHR, again that was not the point. The intention was that AMS would have very much been a reliever hun for LHR. BA tried to do that at LGW in the 1990s but it failed because it was trying to split London O&D traffic across two hubs, but just transfer traffic. AMS would have been what it has been for many years - an efficient hub that allows the Netherlands to punch above its weight for internatioanl air traffic. LHR-AMS would likely be a widebody type service just because the hubs would be transferring a lot of Pax and Cargo. But AMS would never have been a feeder for LHR. Hell, who would route Europe-AMS-LHR-rest of the world?
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RE: IAG CEO: BA Should Have Merged With KLM

Sun Apr 17, 2016 10:16 pm

Quoting FlyCaledonian (Reply 40):
The intention was that AMS would have very much been a reliever hub for LHR.

Some would say it is doing just that! 
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