Air France-KLM's 'Transform 2015' Turnaround Program
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Case Code: BSTR424 Case Length: 16 Pages Period: 2003-2012 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.500 Organization: Air France KLM Industry: Aviation Countries: Europe; Global Themes: Strategy Implementation, Turnaround Management, Reorganizing |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Merger
On September 30, 2003, Air France and KLM announced their intention to merge through a public exchange offer. In May 2004, the two merged to form the largest European airline group, Air France-KLM. On May 5, 2004, Air France-KLM shares were listed for trading on the Euronext Paris and Amsterdam markets as well as on the New York Stock Exchange. Two days later, Air France was privatized following a transfer of the majority of its shares to the private sector, thus diluting the French government shareholding. On September 15, 2004, the group's organizational structure was finalized with the creation of the Air France-KLM holding company, regrouping the two airline subsidiaries, Air France and KLM...
A Successful Merger?
The merger between Air France and KLM was a unique example, not only because it was a cross border merger, but also because two airlines with different cultures formed one company where both companies kept their brands alive by flying their planes under their respective names. In the initial years, the merger was considered a success story, because of early anticipation of the needs of consolidation in the European aviation industry. In 2007, the company completed its first phase of integration and became the best performing airline globally in terms of profitability. It was a global leader covering 240 destinations in 105 countries with its 900 aircraft. In the financial year 2006-07 ended March 31, 2007, Air France-KLM generated revenues of € 23.1 billion, an increase of 7.6 percent year on year...
New Challenges
However, the company started facing problems from 2008. The global financial crisis of 2008-09 affected the airline industry very badly. The industry responded by reducing capacity and cutting costs. In the financial year 2008-09, Air France-KLM reported revenues of €23.97 billion and an operating loss of €129 million. From then onward, the airline started struggling to improve its financials. In the financial year 2009-10, Air France-KLM reported a 15 percent decline in revenues to €21 billion, and an operating loss of €1.28 billion...
The Transform 2015 Plan
In 2012, Air France-KLM continued to counter the effects of downturns in its domestic market as well as in several of its foreign markets: Japan, the Middle East, and North Africa. In France, the company was grappling with high costs due to increasing fuel prices. Moreover, weak economic growth due to Europe's financial crisis aggravated the problems for the airline...
Outlook
On October 8, 2012, Air France-KLM and Etihad Airways signed an agreement to codeshare on flights across the airlines' networks. The codeshare agreement would allow both airlines to offer joint codes on destinations in Europe, the Middle East, Asia, and Australia. At the same time, Air France-KLM also announced another codeshare agreement with Air Berlin , in which Etihad Airways held a 29.21 percent stake...
Exhibits
Exhibit I(A): Organizational Structure of the Air-France-KLM Group Showing the principal Subsidiaries and entities (September 2004)
Exhibit I(B): Air France-KLM Holding Company Structure (2007)
Exhibit II(A): Air France-KLM's Revenue by Sector of Activity (2011)
Exhibit II(B): AIR France-KLM's Passenger Revenue by Region (2011)
Exhibit III: Air France-KLM's Activity by Network in 2011
Exhibit IV: Organizational Structure of the Air France-KLM Group Showing the Principal Subsidiaries (2011)
Exhibit V: Air France-KLM Investment Reduction: 2011-2014
Exhibit VI: Air France-KLM's Financial Highlights (2008-2012*)
Exhibit VII: Organizational Structure of Air France (2013)
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