Originally Posted by
San Gottardo
Can someone help me what the fuss is all about? What issue do people in the Netherlands have with the strategy? I did follow the story, and what I had understood was
- Pieter Elbers and Ben Smith don't like each other, and there was a possibility of PE's CEO-ship of KLM not being renewed, which people in the Netherlands were concerned about >> not an issue anymore, PE has been re-appointed as CEO of KLM, and is Deputy CEO of the group.
- Ben Smith's strategic vision for the group was that AF was going to be the premium brand whilst KLM was going to have a higher leisure component, simply because AMS is running out of capacity and therefore growth there would come from stuffing more people on planes >> what's the issue with that? It means growth for KLM, not destruction of KLM. I hope the issue is not the Dutch feeling miffed because they aren't the "premium" player anymore?
- BS' vision for the group also included more cooperation and integration in a number of central functions/shared services >> what's wrong with that? It may make perfect sense to have a more integrated operating model if it means economies of scale, higher effectiveness, a more agile company
Now the Dutch state buys into the AFKL group. What issue do people in France have with that?
- If they object the Dutch state, i.e. that of the other national carrier that is part of the group, being a shareholder just in the same way that the French state is >> a clear sign of what many suspected all along, the French believe that AFKL is French and that KLM is a vasall, and that in France people still think of AFKL of a company that is and should be state-influenced. It also reveals the widely held belief in France of "we saved KLM, and so they should shut up and be controlled", and of "we bought KLM, and so they should shut up and be controlled".
So what's the actual problem, beyond all the blessed feelings and the posturing?
And: can someone recount here the *exact* details of the AFKL merger? What exactly did the transaction look like? Because the way I remember it it was more of a *merger*, not an acquisition by AF. And even if admittedly in a case like this the boundaries between merger and acquisition are somewhat blurred I cannot see anything that would justify "the French" of behaving like the conquistadores.
And: is it really true that KLM was at the verge of bankruptcy as "the French" so often claim? I seem to recall that KLM was indeed in a very difficult strategic position (difficult to have its global network and the AMS hub survive alone in a competitive landscape where other airlines where getting ever bigger), and a merger with AF solved many of those strategic problems. And I also do recall that there were pension liabilities of several hundred million EUR that were then funded thanks to the merger. But it wasn't the case that AF solved KL from imminent bankruptcy - or was it?
Some corporate history with precise facts on finances and strategy would be helpful.
The problem for the Dutch is mainly that they found a sound business model for KLM, obviously earning making the money for group. Instead of that Ben Smith would copy that business model for AF so their earnings would go up to the desired level, the CEO is proposing that AF should be the “premium” airline. There is now nothing “premium” about AF with all their cancellations and delays of last summer. AF thinks they are very “chique”, but the airline needs drastically to be reformed.
So why would KLM accept that? As if there is not enough room on the aviation market now? I think it would be so healthy to continue that internal competition who offers the best product, service, departure and arrival times as well the best airport to transfer in. Ben Smith has two potential winners with AF and KL, downgrading KL to a leisure oriented airline would not make sense at all. KL has a dominant position in China that AF doesn’t have. China is super important for the next years of growth.
There is Transavia that could play that role in offering leisure destinations from let’s say EIN, GRQ and RTM in The Netherlands and LYS, NTE, TLS, MRS and numorous other airports.
Not everything should be peace love and harmony between KL and AF, a good sense of competition is very healthy for both of them and makes the group stronger as a whole.