Chris Jasper/LONDON
KLM and Alitalia have agreed details of their alliance, to be launched on 1 November, claiming it "represents a new industrial model for air transport in Europe".
In an Alliance Settlement Agreement signed last week, the pair defined an earnings-sharing formula according to which they will divide earnings (calculated before tax and other deductions) on a 50:50 basis. Until 31 March 2001, however, only profits in excess of 450 million euros ($470 million) will be shared.
The airlines - partners in the emerging Wings alliance - have also agreed to create a "single, unified management structure" or Network Organiser, for the passenger and cargo joint ventures they agreed to establish last November.
The alliance will see the Dutch and Italian flag carriers fully integrate their global networks. It involves KLM cityhopper, Alitalia Team and Alitalia Express, but no other subsidiaries. A further announcement on the structure and principles of the alliance's governance is due next month. This will define the powers of a new Joint Alliance Board compared to those of the two carriers' boards.
Operational, commercial and economic integration under the Network Organiser will take in activities including network planning, marketing, distribution, sales and revenue management. Each airline will continue to manage its own fleet and flightcrew supply activities, as well as engineering, maintenance, handling and catering. The pair have also agreed to study "further financial, organisational and legal integration" to be implemented before 1 April, 2002.
The Dutch carrier's chief executive Leo van Wijk describes the alliance as "the most complete integration of commercial passenger and freight operations in our industry". His opposite number at Alitalia, Domenico Cempella, says the depth of co-operation involved is "unprecedented".
In a further radical step, the airlines have agreed that with immediate effect all future fleet decisions "will be undertaken jointly". For new orders, they will "share the investment on an equal basis". Cash from aircraft disposals will also be shared 50:50.
The carriers are pitching their alliance as "Europe's largest airline in terms of passengers carried" and regard its multi-hub nature - revolving around Amsterdam Schiphol, Milan Malpensa and Rome Fiumicino - as a major strength. KLM has surprisingly agreed to pay Alitalia 100 million euros to compensate it for losses incurred in launching Malpensa.
The alliance runs for 10 years from the signing of a Master Cooperation Agreement last November. It will be automatically renewed unless either party gives three years notice of its termination. KLM can pull out and receive L484 billion ($255.4 million) in compensation should Alitalia fail to privatise before next June.
Italian financial sources say Rome is seeking a stable group of shareholders to form the nucleus of Alitalia's new ownership. The privatisation may see KLM take a 6-7% stake, although the airlines have played down suggestions that a major equity swap is planned.
Source: Flight International
