Twenty years after the takeover of KLM by Air France, in April 2004, the French and Dutch have learned to live together. “We chose a very simple concept: one group, two airlines”, Jean-Cyril Spinetta, then CEO of Air France, declared in October 2003 to reassure both employees and the financial markets. With hindsight and at first glance, the gains from the acquisition of KLM by Air France do not seem obvious. At the time of the merger, in 2004, Air France-KLM was the world’s leading airline. Twenty years later, the duo is only in sixth place.
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The Franco-Dutch group has ceded its rank as world leader to its German rival Lufthansa. It even has to scrap so as not to be overtaken by the British IAG, parent company of British Airways and Iberia. However, on a financial level, during these first twenty years, the cumulative turnover increased by a third. It increased from 19.16 billion euros in 2003 to more than 30 billion euros in 2023, as announced on Monday June 17 by Benjamin Smith and Steven Zaat, respectively CEO and CFO of Air France. -KLM.
“The investment in Alitalia was a mistake”
The competitive landscape has also changed significantly. “At the time, there were six rivals in the United States”, recalls Mr. Zaat. In fact, concentration is already at work. Proof, “the number of major American companies has fallen from six to three”, points out Ben Smith. He also notes “the rise of Gulf companies, Turkish Airlines and Chinese companies”. Not to mention the irresistible emergence of low-cost airlines, such as Ryanair, which has become the most profitable in Europe.
Jostled by her rivals, but also undermined by her internal quarrels between French interests and sensitivity of the Dutch, Air France-KLM missed acquisition opportunities. “Our competitors are getting bigger. We want to participate in consolidation”, says Ben Smith. It is true that while Air France twice failed to get its hands on Alitalia, IAG made short work of Iberia. Lufthansa made a great deal with the acquisition of Swiss. Ultimately, it is the German company which should, in the coming days, bring Alitalia, now ITA Airways, into its hands.
However, with Canadian Ben Smith, at the helm since 2018, Air France-KLM is back in the race. “The investment in Alitalia was a mistake”, he admitted. After the South, it is also towards the North that the company has turned its sights and its ambitions. It has just acquired nearly 20% of the capital of the Scandinavian company SAS. To be finalized, the operation must still receive approval from Brussels. But, without delay, SAS left Star Alliance to join Air France in the SkyTeam alliance.
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