Air France, KLM Will Merge Under Holding Company

Air France and KLM this week formally announced the signing of a letter of intent that will lead to the creation of Europe's largest airline group: Air France-KLM.

By the time all the dotted lines get drawn, the network of joint ventures, code shares, and various other alliances will put a lot of big premium airlines into the coalition. Soon, you'll see strong connections among not only Air France and KLM, but also Continental, Delta, Northwest, and Alitalia.

Largest or Third-Largest? It Depends on What Counts...

The Air France-KLM airline (both will continue doing business under their own names, for five years or more) will be third-largest in terms of rpms (revenue-passenger-miles), but the world's largest, in terms of revenues. It would also bolster the SkyTeam alliance, to make it size-competitive with the Star Alliance group.

The arrangement hasn't yet been allowed by the European government or by the US's SEC, both of which claim the ultimate power to approve business deals. EC approval could come before Thanksgiving; no one is giving odds on when US approval might come, although with Delta (and Continental and Northwest) standing to gain, there will be strong insider political support for the deal.

FMI: www.airfrance.com; www.klm.com