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Wed, May 05, 2004

Let's Go Dutch

Air France Lands KLM, Alitalia Left To Grapple With Bankruptcy

Air France and Holland's KLM Airlines completed their merger Monday night, making the new airline the third biggest in the world -- behind American and United.

The deal, reportedly worth $1.03 billion, did not include Alitalia, the Italian carrier that had hoped to be part of the final package. Now, Italian officials are scrambling for a way to bail out the troubled airline, hoping that Alitalia can reach a restructuring deal with its unions.

As for the Air France-KLM deal, both Air France and KLM will keep their identities, according to both airlines. KLM will remain a Dutch carrier, with 51-percent of its voting rights held in Holland.

"It is a merger only in name as they are not combining large elements of their cost bases," said one London-based analyst who wanted to remain anonymous. "Given the structure, I think they could run into trouble if there were an industry shock and they wanted to take out a lot of capacity and costs."

FMI: www.airfrance.com, www.klm.com

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