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Fri, May 07, 2004 - Page 12 News List

Air France predicting rosy synergies with KLM merger


Air France said on Wednes-day it expected "minimum" synergies arising from its merger with KLM Royal Dutch Airlines to total 65 million to 75 million euros (US$79 million to US$91 million) for the 2004 to 2005 financial year.

The synergies are projected to rise to between 110 and 135 million euros for the following financial year, the companies said.

Synergies constitute an improved performance resulting from the combination of two companies that should exceed that of their previously separate parts.

"We are convinced that the figure of 65 to 75 million euros is a minimum figure and that the reality could be higher," Air France chief executive Jean-Cyril Spinetta said at a press conference on the merger.

About 60 percent of synergies were expected to be generated by cost savings and 40 percent from increased sales, but the estimates do not include potential savings from pre-existing agreements the two companies have with other operators.

The figures also confirmed previously announced long-term synergies of 400 million to 500 million euros, set to be achieved in the fifth year of the combination.

Air France said on Tuesday it had acquired the Dutch airline in a deal that creates the biggest European carrier and the No. 1 worldwide in terms of sales.

The airlines will retain their distinct brands as planned, but from June 1 will operate a harmonized timetable on all flights and share terminals at the Roissy airport outside of Paris and the Schiphol airport near Amsterdam.

Cargo sales are expected to total 2.5 billion euros.

The companies said that given Air France's strong presence in southern Europe and that of KLM in the north, they aim now to build up their network in central and eastern Europe. They also announced the suspension of unprofitable flights, including those operated by Air France between Roissy and Bristol and Birmingham and those by KLM between Amsterdam and Casablanca.

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