The formal launch of the "virtual merger" at the beginning of November was accompanied by much shuttling of senior executives between Rome, Milan and Amsterdam.
Henny Essenburg, KLM's executive vice president, network organiser, has taken the prize job as managing director of the two airline's passenger joint venture and will henceforth be residing in the Italian capital. Mario Pascucci, vice president Alitalia Cargo, is leaving Italy for the Dutch capital to take up his post as managing director of the cargo joint venture. Sales, distribution and strategy responsibilities have been divided equally between the two airlines.
Both Essenburg and Pascucci will be reporting to the Alliance Committee, which will be responsible for drawing up "joint visions, policies and guidelines ", for the two airlines. Among the priorities are the integration of the two organisations and brand alignment.
Each airline will still manage their own fleets and retain separate crew but will provide aircraft free of charge to the Network Organiser, which combines the strategic planning, network management and commercial activities that Essenburg and Pascucci now oversee. But from November 1999 fleet purchases will be paid for jointly, income from assets sales will be shared, and with jointly purchased fleets in the future capacity may also be shared.
Information technology, handling and maintenance are not yet part of the alliance and will charge the Network Organiser at market rates. Andrew Light at SalomonSmithBarney predicts that while synergies between the two airlines - estimated at a current Euro400 million ($374m annually) - are currently 70% revenue-related, if non-core activities are merged major cost savings can be made.
In a ground-breaking move for airline alliances the two carriers have created a single revenue management team pursuing a single pricing strategy. They are also pressing ahead with closely co-ordinated marketing which will seek to associate Alitalia's green livery colours with those of KLM's blue.
An alliance umbrella brand awaits a global multilateral tie-up. The US Department of Transportation has yet to grant anti-trust immunity for a fully blown three-way alliance with US carrier Northwest Airlines - although industry sources say clearance, together with the formal signing of the US-Italy open skies agreement, was scheduled for early December. Talks with Continental, the fourth pillar in the alliance, are said to be moving slowly.
Source: Airline Business
