Air France/KLM Deal Complete

The French government was expected to cut its stake in Air France following it's acquisition of KLM Royal Dutch Airlines in a share offer which was completed May 3rd. Air France has created one group with a single, consolidated balance sheet, but the two airlines will continue as separate operating companies.

To achieve the combination, Air France had to give the Dutch government assurances the two airlines would retain their respective home bases, operating licenses and traffic rights.

Alitalia, which had hoped to be included in the initial combination of Air France and KLM has been plagued by financial difficulties. The Italian government is seeking an agreement on a restructuring plan, warning that without agreement on job cuts and cost savings, the carrier will go bankrupt. The Italian flag carrier suffered a five-day strike in late April leading to cancellation of 1,500 flights and costing the airline an estimated $47 million.

In other news, International Air Transport Association (IATA) members reported international passenger traffic increased 13.3% in March (vs. March 2003). Cargo was also performing well, achieving an 8% increase in March or a 10.1% increase January through March. Capacity, measured in available tonne kilometers, rose 5.7% for the month and 7% for the quarter.

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