The merger of Air France-KLM
1. Introduction 3
2. Cause of the problems faced by Air France-KLM post 2009 4
3. The organizational structure of Air France-KLM 5
4. Discussion of the ''Transform 2015'' program 6
5. Conclusion 7
1. Introduction
In 2004 the airlines Air France and KLM merged into a new entity known as Air France-KLM. Both the CEO's of the companies saw the need to merge because of the need for consolidation in the European aviation industry. It was a unique merger in the way that is was a cross border merger between companies with different nationalities and cultures. Both companies agreed upon retaining their own brands and remained mostly autonomous. Both the CEO's, Leo van Wijk (KLM) and Jean-Cyril Spinetta (Air France), treated each other as equals. They tried to look like a team to the outside world, and succeeded in this aspect.
In the initial years the results of the merged companies were great. It really seemed that the two companies had the much needed synergy to create the 1+1+3 effect. However, the global economic crisis of 2008 hit the aviation industry very hard. The operating profits were negative and the companies' debt rose to 6,5 billion euro's. Also Air France-KLM is facing problems with fierce competition from the low-cost airlines like EasyJet and Ryanair. It seemed that Air France-KLM was performing worse than other companies in the aviation industry.
Change was needed within the company to solve these financial problems. Therefore the ''Transform 2015'' program was announced in January 2012. This paper will review the cause of the problems of Air France-KLM and discuss both the organizational structure as the Transform 2015 program.
2. Cause of the problems faced by Air France-KLM post 2009
As stated in the introduction Air France-KLM (AF-KLM) has been struggling with financial problems since 2009. The economic crisis of 2008 has played a part in this, however it seems that AF-KLM is performing worse than other companies within the aviation industry. Therefore one must look into other possible factors that contributed to this poor financial performance.
Below in figure 1 the financial performance regarding operating profit and net profit is shown .
Figure 1 shows that in the first years of the merger the financial performance was good. Operating profits kept increasing every year while the net profit slowly reduced from 2006 till 2008. In 2007 AF-KLM had become the best performing company in the aviation industry regarding profitability. They had over 900 aircrafts and flew to 240 different destinations in 105 countries.
In the year of 2005, the companies eventually found a way to make it easier for the companies to combine without having any major issues or problems. Unfortunately, around the year of 20010 the merging com...
The two airlines have minimal similarities; each is successful at what they do and are no-frills
The Airline Industry is a fascinating market. It has been one of the few industries to reach astounding milestones. For example, over 200 airlines have gone out of business since deregulation occurred in 1978. Currently, more than 50% of the airlines in the industry are operating under Chapter 11 regulations. Since 9/11, four of the six large carriers have filed for and are currently under bankruptcy court protection. Since 9/11 the industry has lost over $30 billion dollars, and this loss continues to increase. Despite the fact that the airline industry is in a state of despair, JetBlue has become the golden example, a glimpse of what the industry could be.
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
No matter how a business operates, change is inevitable and affects all businesses. CAMERON SMITH investigates the changes Qantas have had to undergo in order to keep up with their competitors, whilst navigating the challenges of low cost of fares.
Merging two companies does not exchange any cash between each other. Merging is usually done in free of cost; this is a likely reason for the high revenue made by the AT Kearney despites challenges faced to them.
In terms of financial performance both companies have performed well. This brief review will focus on the financial performance such as profitability, solvency and liquidity.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Albers, S. B. (2009, March 13). crisis of Qantas. Retrieved May 14, 2014, from Qantas crisis: http://wenku.baidu.com/view/31572f48cf84b9d528ea7a56
Firstly, the need for achievement is met by understanding that people strive to master difficult situations, endeavors or challenges. This idea works on both an organizational level, as well as an individual level. From an organizational level, it is well known that a merger of this magnitude had never been attempted. With that brings a great challenge to succeed, and lets the leadership work in new and innovative ways to make such a merger successful. McClelland’s theory states, in regards to need for achievement, that people strive “To excel one’s self…to rival and surpass others… to increase self-regard by the successful exercise of talent” (Kreitner & Kinicki, 2010, p. 215). By this definition, the merger would motivate leadership to excel in the face of a challenge, and to increase their professional self-regard in their success in doing so. On an individual level, you are asking the performers and employees to recognize both economic and social climates, and to come together in action to save both their careers, as well as their passion in life. Such a merger would only embolden self-worth and perceived achievement, because they would be part of a much larger organization more adverse to risk and future change, and they would easily be able to look at other similar organizations and realize they were part of an organization who accomplished something never before attempted.
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Before the alliance the two firms were in totally different market and they were also in different country but the industry was of same type. Both of the firms were aware about their future plan and lacking.
Tom, Y. (2009). The perennial crisis of the airline industry: Deregulation and innovation. (Order No. 3351230, The Claremont Graduate University). ProQuest Dissertations and Theses, , 662-n/a. Retrieved from http://search.proquest.com/docview/304861508?accountid=8364. (304861508).
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