KLM Air France share swap.

Old Apr 26, 04, 3:36 pm
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Question KLM Air France share swap.

Does anyone have any thoughts/information on KLM- Air France share swap? IS Air France traded on any of the US stock exhanges? What is trhe stock symbol? My wife got some info about the swap, but it seems one stabnds to lose by swapping KLM for Air France shares.
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Old Apr 27, 04, 3:56 am
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sell
sell
sell
sell
sell
sell
sell
sell
sell
sell
sell
sell

The deck chairs have now been re-arranged on the Titanic !!!!
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Old Apr 27, 04, 6:45 am
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If I remember my Business Administration course correctly, any known future development will have been reflected in the current share price.
Haven't followed the market so daren't say for KLM; depending on your stake it might be worthwhile to hold on to the shares and possibly using an option construction to hedge any risks.
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Old Apr 27, 04, 7:40 am
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Originally Posted by Steve Fenton
sell
sell
sell
sell

The deck chairs have now been re-arranged on the Titanic !!!!
Grin, did it last week. With KLM up almost 250% in the last year, I'll stick with the sure thing as opposed to however AF can mess up what's already a mess!
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Old Apr 28, 04, 5:55 am
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However much I hate AF on the ground, I would have to concede that they have not done too badly financially in recent years. They certainly coped with 9/11 much better than most European carriers.

To (not )answer the original question, I do not think that AF is quoted on any of the mainstream US exchanges. Shares (presumably ADRs), however, appear to be available on the OTC market (ticker: AIFRF)

If it is for analysis purposes, however, you might as well look at the underlying shares on the Paris Stock Exchange, as ADRs follow the underlying share.

The million-dollar question, of course, is how they will digest the merger.
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Old Apr 30, 04, 11:30 am
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We had bought KLM in 2000. So at this time we were only slightly ahead. The swap arrangement with AF was that for 10 KLM shares, you get 11 AF shares and 10 warrants(option) to puchrhase 2 AF shares for 3 KLM shares at a price of 20 euros. Right now AF is priced at 14.63 euros. The option could not be excercised before 18 months and would be worthless after 3 and half years. So I decided to cash out of KLM. Thank you all for your response.
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Old Apr 30, 04, 8:33 pm
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Yeah AF is/was brilliant financially, the government dumped billions of dollars as several last time top up subsidies, and then when they were no longer able to do so, the government made it so that they could become a domestic virtual monopoly. Yeah, they are real capitalists and entrepeneurs.
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Old May 1, 04, 10:15 am
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mmm... can you remind me how much help European airlines (including AF) received from their governments and from the EU and how much US airlines received from the US government post 9/11?
Can you remind me which country has a bankruptcy code which permits airlines, under its chapter 11, to continue trading while insolvent and be shielded from their creditors for many years?
I find it rather amusing that the US is always first to lecture others on free market principles but is always very quick to set those principles aside whenever it is deemed convenient. I have not seen much sign of the US being willing to negotiate on cabotage rights under Open Skies agreements despite the free trade rhetoric. Nor have I seen much willingness to get rid of limitations on ownership rules for domestic operators either.
And exactly what has the French government done to ensure that AF is in a monopolistic position, when they have no power over intra-EU (including domestic) access to routes and fares (this is a matter for the EU, not the Member States)?

I would not regard AF as brilliant, but it is not the nightmare that is so often depicted. Financiallly, they certainly have done a heck of a lot better than KLM. Why do you think that KL shares rose substantially when the takeover was announced and AF shares fell?
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Old May 1, 04, 1:36 pm
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Originally Posted by NickB
And exactly what has the French government done to ensure that AF is in a monopolistic position?
Well, it is not much of an exaggeration to say that France is more or less run by a coterie of ENA graduates, professional backroom dealers to a man. For example, three out of seven members on the slot allocation committee are either AF employees, or employed by companies affiliated to AF.

johan
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Old May 1, 04, 5:54 pm
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Hey Nicky, you got some kind of anti-US complex?? I really don't see what the US or its carriers have to do with this subject, especially as its you who brought it up. As you have it should be noted that between 1992 and 1997 AF received more in DIRECT subsidies from the French government than the ENTIRE US airline industry has received since 9/11 (Where one can consider that all of AF's losses were due to bureaucracy and idiocy while one can argue that a huge chunk of the US losses, at least initially were due to terrorist action and the total shut down of the US air transport system).

BTW, you are right, there is no Chapter 11 in Europe, especially with government carriers, generally when they are absolutely insolvent many governments find ingenious direct and even non-direct ways of dumpingtaxpayer dollars into their airlines, Until the mid 90's this was actually allowed and when it was no longer allowed by the EU, the more "honest" of them (such as AF in this case) were allowed to make a last time injection of funds into their airlines, often taking into account how much they projected that the airlines would need for the next decade. Since that time even this provision has been violated by many including Sabena (in its old form and its new form is just another way of doing it by allowing the old airline to die, and start up a new one), Olympic, Aer Lingus, TAP, Iberia (An ingenious one, whereby the government basically discharged IB from all of its debts from its very bad idea of taking over airlines such as Aerolineas Argentinas, Viasa and Dominicana among other handouts), Alitalia and even Lufthansa (who since their last handout have been pretty good about it).

As far as your open skies/cabotage rights rant goes, it is nonsensical. The Eu has only recently tried to make a community wide air past with the US. Why would the US let KLM let's say fly anywhere they want in the US? What would a US airline get, rights between Amsterdam and Rotterdam? In the case of BA, what would they get LHR-EDI rights? this is silly. As far as wonership provisions are concerned, while the ceilings are different (24.9 vs. 49.9 re: voting shares) what is the difference really as neither allows for operational control of an airline n the other "block" anyway. Besides, this is 2004, not 1995 (The last time I can recall this being an issue regarding KL and NW), besides Richard Branson perhaps wanting a bigger direct stake in the airline he is supposed to be starting in the States, no one is looking for operational control of another airline on the other side of the pond.

As for control of Domestic operations, you must not have flown much in France of from France over the last twenty years, otherwise you would know exactly what I was talking about. AF was "encouraged" to create Grup Air Franc and basically soak up Air Inter and others, monoplizing the industry (interestingly enough getting other indirect subsidies in the process), other smaller more private airlines were sidelined, etc.

If KLM were handed the equivalent today of US $8 billion, they would not be in the situation that they found themselves last year. Then again no one has ever dumped that equivalent of money into an airline other than the French government.
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Old May 2, 04, 8:55 am
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Originally Posted by johan rebel
Well, it is not much of an exaggeration to say that France is more or less run by a coterie of ENA graduates, professional backroom dealers to a man. For example, three out of seven members on the slot allocation committee are either AF employees, or employed by companies affiliated to AF.

johan
You are not into sweeping overstatements, are you? As to the ENA, of course, 'old boy network' is a phenomenon unique to France...
As to slots, membership of COHOR is open to any airline using French airports (like ACL in the UK, for that matter). Strange, then, that to overcome the alleged bias towards AF, other airlines are not interested in becoming members. Especially strange that Easyjet, who have been so critical of Cohor in their advertising, do not wish to become member. Ah, but then they would have to contribute to Cohor's costs...
Also strange that Easyjet intervened in support of Cohor in the legal action over the allocation of the allocation of Air Lib's slots in March 2003.
What is true is that the allocation rules for slots favour established carriers over new entrants. But then this is not a result of bias within the coordination committee but of the rules themselves, which are the product of the EU Regulation and IATA guidelines.
Do you think that Easyjet in the space of two years would have obtained the number of slots it has at ORY and CDG (approx 35 daily flights) in other congested European airports like LHR of FRA?
How have they managed this if AF through the slots coordination committee controls slot allocation?
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Old May 2, 04, 9:03 am
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Hfly, I come clean. You have unmasked my 'anti-americanisme primaire'
I refered to the US because your post implied that AF only operates OK thanks to rigging market rules. What I was trying to say is that the suggestion that the airline industry operates on strict free market principles is a joke, even in the US, whose government is keen to embrace a free market rhetoric and lecture the rest of the world about it but quick to set aside its principles when it is in the interest of US industry. Nothing fundamentally wrong with that, but then, you can hardly complain about the rest of the world not complying with the rules when you don't yourself follow them.

You are 150% right about subsidies to the airline industry in the first half of the 1990s and before. However, that is not the question. The question is whether AF can operate as a profitable airline when deprived, as it now is, of the backup of state aid. And the evidence, to date, is that it is not doing too badly. Faced with the same challenges as other European airlines, it has done rather better than most of them and certainly infinitely better than I suspect most posters here would have expected.
What I was trying to do is redress the balance on what seemed to me to be comments based on anti-AF bias rather than based on objective analysis.
In truth, I would not personally invest in the European (or US for that matter) airline industry: over the long term, the industry has provided poor returns. The no-frills are (or rather were) an exception. I did invest in Ryanair a few years back as it was too good an opportunity to pass, pulled out last year (that was rather nice, thank you) and have no intention of returning in the short-medium term.
However, if I did feel like putting money in a European airline, I would not dismiss AF out of hand.
As to cabotage and EU-US negotiations. Well, the EU did put forward a proposal for a common aviation area a few years back, which would have involved the mutual removal of restrictions on ownership and cabotage rights. I did not see the US government jumping with enthusiasm at that. The US prefers bilateral Open Skies negotiations with individual EU Member States. One of the beauties of a network of Open Skies agreements, from a US perspective, is that it gives US carriers (through 5th freedom rights) traffic rights for intra-EU routes, whereas European airlines do not get the corresponding intra-US traffic rights. OK, they have 5th freedom rights beyond the US but this is of virtually nil value, whereas intra-EU routes are of value to US airlines. Not so much on pax traffic but on cargo traffic. Fedex and UPS use these rights. Compare that to the difficulties encountered by DHL in the US.
I don't criticise the US government for doing so. Quite right that they should be looking after the interests of US industry. But let's not pretend that we are talking here of a fair, principled free market approach. It is about extracting more rights for US airlines than are available to European ones.
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