Air France-KLM Group (AFLYY), formed by a 2003 merger between the French and Dutch flagship carriers, is Europe’s largest airline, and it may be about to get bigger. Air France-KLM just announced plans to increase the role of its holding company to spark greater synergy between the French and Dutch units and to move toward the possible purchase of other carriers, including Alitalia of Italy.
French CEO Pierre-Henri Gourgeon will remain as group head while turning over the top position at Air France to a new executive, whose job will replicate that of the current KLM CEO. The holding company also will now be in charge of information technology, financial management, purchasing, and alliances. The idea is to centralize control at the top.
Air France-KLM purchased 25 percent of Alitalia in 2009 and has the right to buy any stock sold by its fellow shareholders, CAI and a group of Italian investors.
Already, Air France-KLM controls 27 percent of the trans-Atlantic market, helped by its joint venture with Delta, according to Morningstar calculations. That gives the airline pricing power and enables it to use its regional network and alliances to increase long-distance traffic.
Air France-KLM is a founding member of SkyTeam, which executes 23 percent of global bookings, second only to Star's 32 percent, according to Morningstar.
Return to profits
Cost-cutting and increased air travel pushed the company back to profitability in the fiscal year ended March 31. Air France-KLM recorded an operating profit of $174 million for the 12 months, reversing a loss of $1.84 billion the year before. Revenue rose 12.5 percent to $33.7 billion.
Analysts at CM-CIC Securities were impressed with the company’s cost-cutting, and it benefits from a healthy macro environment. “Air transport remains in a favorable condition, particularly in emerging markets,” they write.
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