An analysis of the recent merger of the two major airlines, KLM and Air France.
This paper begins by suggesting that the formation of the European Union opened new opportunities for companies in the region to form bonds and expand their businesses. The paper looks at the effect the merger will have on airline ticket prices overall and the viability of the smaller, no-frills airlines. The writer also explores the effect on the market of the apparently contradictory actions of the EU commissioners at the time of the merger to assess the timing of the approval of the AirFrance/KLM merger and determine what the role of the regulatory bodies might have been in the final result for the air travel industry and its stakeholders.
“With the merger of Air France and KLM, Europe’s second and fourth largest carriers. Europe will be home to the world’s largest airline in terms of revenue. Historically, mergers of this kind have benefited shareholders; they have not benefited many other stakeholders including employees and smaller competitors. (Kim and Singal, 1993) With an avowed intention to become the largest airline in the world, low-coast carrier Ryanair stands to be one of the smaller companies hurt by this merger, as does another no-frills airline, easyJet. The merger was approved by the commissioners of the European Union prior to the very recent and substantial changes made in the way such mergers are viewed and approved, or not. In addition, the merger was approved on the heels of an Air France complaint about tax usage in indirect support of Ryanair’s hub at Charleroi Airport, serving Brussels.”