British Airways and KLM, the Dutch national flag carrier, announced yesterday that they are entering negotiations aimed at closer co-operation.
The talks could lead to an alliance or merger that would create the largest airline in Europe and the world’s third-largest airline after US carriers United Airlines and American Airlines. KLM’s share price rose nearly 7 percent on Tuesday on prospect of the talks; BA’s share price fell by just under 4 percent.
The co-operation talks will provide a test for Rod Eddington, who took over as chief executive of BA in May after heading Cathay Pacific and Ansett, Australia’s second-largest airline.
Two weeks ago BA said it had suffered an operating loss of L310m in Europe. Mr Eddington has made it a priority to bring the airline back into profit in Europe and to play a leading role in the industry’s consolidation. He said there were “significant changes in the European aviation landscape. These include consolidation. Europe is our backyard and is central to our alliance thinking.”
KLM has been seeking a partner since the collapse of its joint venture with Alitalia two months ago. Leo van Wijk, KLM chairman, said last month that the group needed a European merger and that it was willing to be the minority partner. BA has a market capitalisation of about L4.3bn, while KLM is valued at about L800m. Reuters