Air France-KLM merger confirms consolidation of European airline sector

The merger between Air France and KLM announced on 30 September is symptomatic of the increased pressures on the European fragmented airline market.

Historically, the European airline industry has been distorted and fragmented because of national interests in state owned or controlled airlines. With the introduction of liberalisation measures since the end of the 80s, the arrival of new cheap airline carriers such as Easyjet, Ryanair and Virgin Express, and the effects of the post-11 September crisis in the sector, big airline companies in Europe have been under pressure to merge in order to slash costs and become more profitable.

The deal between Air France and KLM will create the third largest world airline company (after American and United Airlines) and the first one in Europe, surpassing British Airways, which recently also announced an alliance with Swiss International. The consolidation of the European airline industry seems to have gained momentum by the prospects of a future "single sky" deal between the EU and the United States (see

EURACTIV 1 October 2003). Italy's Alitalia expressed its wish to be part of the new Air France-KLM coalition and some analysts are expecting other co-operation agreements (Lufthansa-SAS?) in the near future.

The EU's competition authorities will need to investigate this teaming up of Air France and KLM.

 

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