Air France, KLM create Europe’s first mega-airline

Air France, KLM create EuropeÆs first mega-airline    Air France and Dutch national airline KLM said they have reached agreement on a merger that would create the largest European airline and retain the two brands as separate operating companies.
   The two companies, who revealed earlier this month that they were in negotiations, said they expect to sign a definitive deal for swapping stock by mid-October. The resulting airline would create the world's third-largest airline in terms of traffic, behind American Airlines and Delta, according to Reuters.
   Under the merger, which is expected to be finalized in April, KLM will join Air France in the six-member SkyTeam alliance.
   In a related move, SkyTeam member Alitalia said a letter of intent to start talks about fully joining the new Air-France-KLM group as soon as the Italian government relinquishes its stake in the company.
   The merger was made possible by recent changes in European Union regulations loosening restrictions on cross-border aviation services and ownership as part of a larger effort to create a single European aviation market. The move is the first in what is expected to be a series of consolidations within the fragmented, over capacity European market and is timed with the October start of U.S.-EU negotiations on throwing open competition on both sides of the Atlantic.
   In addition to their passenger business, Air France and KLM operate extensive air cargo networks. According to the joint statement, Air France is the fourth-largest cargo carrier and KLM is 11th. The airlines said the combination will improve cargo revenue and reduce costs through the coordination of freighter routes and more efficient hub operations.