FD1971

Nobody is interested in AF to make a profit, so basically all 'real' airlines are not an option. Luckily, there are quite a few airlines out there which work under different criteria, so the ME3 would be delighted to take over...

I can assure you that major law firms are working on scenarios, not only because of the issues with AB and foreign ownership brought up earlier this year.

Alitalia is dead, mostly because the only lucrative market in the past, domestic service, is not what it used to be thanks to high speed trains and low cost carriers...

If KLM is not big enough to operate on their own, we do not even have to discuss Alitalia and their chances...

Let the crane take over the Flying Dutchman to form one mega hub&spoke carrier, let the folks from Qatar or Abu Dhabi invest heavily in AF and the whole airline industry in Europe should benefit.

orbitmic

Meaning what exactly? Firstly, AZ are not on their own, and second the two airlines are fairly comparable in size despite AZ having downsized a lot whilst KL has been expanding (KL traffic is about 25 million pax and AZ traffic 24 million post major cuts).

And in any case, that really wasn't the question that San Gottardo was asking as far as I understand it. I think what he was questioning was whether the AF fundamentals might now be as bad as those of AZ in the run up to the launch of the new AZ. My sense is that AF's situation whilst very critical is not quite as bad as that but there is a "chronic" and structural element in the groups' losses which is very worrying nonetheless.

I always envy people's whose vision of the world is bathed in certainty, regardless of how right or wrong their certainties may be!

Braniff

My strong believe if it comes to it is that French state will bailout Air France. I cannot see a foreign takeover of Air France...

FD1971

Do you really consider the number of passengers to be a suitable parameter to compare the size of an airline?

May I suggest Revenues as a more suitable parameter?

15 years ago, smart people understood that flying roughly 150-200 planes with a long-haul fleet of roughly five dozen aircraft is not enough.

AZ operates around 100 aircraft and appr. 20 long-haul aircraft resulting in a TO of roughly 3.5 billion (KL is close to 10 billion)

Taking a look at the bigger picture, are there real any arguments against an investment by Qatar or Abu Dhabi and a divestiture of KL?

A scenario without massive investment by another player would include major major changes to the organisation, we are talking about billions in costs, we are talking about 4-5 years for one scheme, very likely 2 projects of 3 years or so.

Remember that the competition is 1-2 major restructuring schemes ahead of AF. LH finished to score and they are starting with new projects already.

To give you an idea of the task ahead:

Lufthansa:

Pension obligations in 2040: appr. 15 billion

Provisions set aside for the pension obligations as of now: roughly 6.5 billion

At the moment, the return on financial investments to fuel the pension funds is around 1% less than expected...

And, again, this is Lufthansa with a working business model, with affiliates that were restructured over the last years (OS is still a minor concern) and not an airline like AF, which has to achieve all of that.

One thing is for sure, just ask the good folks at AB. The cuts are less severe after being taken over by the folks from the Gulf (at least for some time...)

Under the bottom line, many stakeholders might actually benefit more in case of a massive investment instead of a major scheme to restructure the group.

FD1971

They just missed the 20th Anniversairy of the Ffr. 20 billion bailout in the early 1990's (which was illegal according to the EU...) , but this is indeed the most likely scenario.

irishguy28

That would be illegal.

And that's the reason why Malév collapsed - they were forced to repay illegal state aid back to the Hungarian government.

FD1971

Isn't it time to rewrite some EU laws anyway?

Dublin comes to mind rather quickly!

On the other hand, as long as you convince Merkel to approve it, it should be ok. And vice versa, the French do not object when Germany has to save RWE and E.ON in a couple of years.

Braniff

I think France has a bit more clout than Hungary! As somebody said you enforce rules on your enemy, you intrepret them for your friends !

NickB

Surely what another airline would be interested is not the wonderful airline that AF is per se but rather capturing the market of one of the largest EU Member States. These opportunities do not present themselves everyday so, from a long term strategic perspective, this is rather alluring even if the company itself in its present state is not the most attractive proposition. Do you think that LH would not be interested in being the overwhelmingly dominant player in Germany AND France or BA in the UK AND France?

So there is some "raw" attractiveness to such a proposition. The real issue for them, though, is the actual cost of capturing that market and the size of the work to be done in an environment which may be rather hostile.

NickB

It has become more difficult, though. The Commission systematically seeks repayment of illegal aid in the transport sector these days.

Union State aids policy is in enforced by the Commission rather than the Council. National governments do not control it.

I think that you over-estimate the capacity of France to avoid application of legally enforceable rules.

ANstar

I personally think this is what they need to do to allow the airline group to remain viable. AF crews (and KL) already work far less than say their IAG counterparts. AFKL Management need to stop using band aids and start making some tough decisions.

FD1971

+1

But please inform the flying public in advance, because the strikes following such tough decisions would make LH pilots look like pre school girls.

FD1971

But how attractive is the market these days?

LCC infiltration, the TGV plus more and more foreign competition on the tracks, very high operating costs, purchasing power per household, average wages being stable at best etc.

irishguy28

If that happened, Air France might face having access to the US restricted or completely curtailed; it may also be forced out of Skyteam and the TATL immunised joint venture if that happened.

You know how much Delta (and even Air France themselves) detests "unfair" state subsidies....

("unfair" meaning any state subsidy provided by a state other than the United States)

FD1971

Good one. ^