Subject category:
Strategy and General Management
Published by:
Amity Research Centers
Length: 14 pages
Data source: Published sources
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Abstract
The flag carriers Air France (AF) and KLM Royal Dutch Airlines (KLM) came together to form AF-KLM Group in May 2004 to stay ahead over sweeping changes in the European skies. It was the first cross border merger of that time and the focus then was on network synergies rather than corporate synergies. The single ambition was to become a powerful player in the Single European Market, drawing on the strengths and destines of two airlines AF and KLM. In addition, build a new entity, improve profitability, and offer best services to customers, besides protecting jobs over the long-term. By 2008, the AF-KLM Group combination emerged as a perfect example of integration (cross-border mergers), in the turbulent aviation industry. The Group was able to remain profitable despite several challenges related to differences in cultures, infrastructure and route networks. However, since 2011 the AF-KLM was facing issues related to high fuel costs, moribund economic growth, high debt and labour costs. The airline group had undertaken measures to cut costs and wage moderation which led the unions to protests. The airline management and the unions were locked in a battle over changes in working practices. Moreover, the merger of AF and KLM remained incomplete, even after a dozen years. Although, AF-KLM was able to post a modest profit in 2015 after six years of losses due to cheaper fuel and cost cutting measures. But a sudden change in the leadership and continued resistance from the unions against reforms left airline management with a difficult task to draw a credible plan for the future of the airline group.
Subject category:
Strategy and General Management
Published by:
Amity Research Centers
Length: 9 pages
Data source: Published sources
About
Abstract
The flag carriers Air France (AF) and KLM Royal Dutch Airlines (KLM) came together to form AF-KLM Group in May 2004 to stay ahead over sweeping changes in the European skies. It was the first cross border merger of that time and the focus then was on network synergies rather than corporate synergies. The single ambition was to become a powerful player in the Single European Market, drawing on the strengths and destines of two airlines AF and KLM. In addition, build a new entity, improve profitability, and offer best services to customers, besides protecting jobs over the long-term. By 2008, the AF-KLM Group combination emerged as a perfect example of integration (cross-border mergers), in the turbulent aviation industry. The Group was able to remain profitable despite several challenges related to differences in cultures, infrastructure and route networks. However, since 2011 the AF-KLM was facing issues related to high fuel costs, moribund economic growth, high debt and labour costs. The airline group had undertaken measures to cut costs and wage moderation which led the unions to protests. The airline management and the unions were locked in a battle over changes in working practices. Moreover, the merger of AF and KLM remained incomplete, even after a dozen years. Although, AF-KLM was able to post a modest profit in 2015 after six years of losses due to cheaper fuel and cost cutting measures. But a sudden change in the leadership and continued resistance from the unions against reforms left airline management with a difficult task to draw a credible plan for the future of the airline group.
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Subject category:
Strategy and General Management
Published by:
Amity Research Centers
Length: 9 pages
Data source: Published sources