KLM's senior management came in for criticism after the breakdown of merger talks with British Airways. As the development followed hard on the heels of the severing of the alliance with Alitalia, management was criticised for being left out in the cold in the rush for European partners. Despite this, a less pessimistic view of KLM's prospects is emerging.
"The preferred route for KLM is to go with an equal-sized partner, and one offering more potential with a larger airport that can grow," says Bianca Stuijfzand, a transport analyst with ING Barings. Ironically, Alitalia arguably comes closest to filling these criteria.
"It is true that KLM needs to have a European partner, but it does have some room to breathe in the short term," says Stuijfzand, adding that KLM should continue to talk with the likes of Air France, Alitalia and the SAir Group. But she believes KLM has a year to rethink its alliance strategy before committing to a relationship.
With little network overlap, and a green light from Brussels for the deal, Alitalia remains the best fit for KLM, and could return as a potential partner, says Stuijfzand.
SAir's Swissair is not as attractive, with too much network duplication, and, though Air France has the growth opportunities of Paris Charles de Gaulle Airport in its favour, a partnership would be weighed too heavily towards the French carrier. Another possibility will be for KLM to seek out an Asian partner, possibly Malaysian Airlines, she says.
For now, KLM will focus on implementing its Baseline cost-cutting programme this winter. The effort, to include the elimination of 2,000 jobs, a reduction in capacity and dropping loss-making routes, is aimed at saving over $200 million per year.
Source: Airline Business
