With new major alliance competition threatening, Northwest Airlines and KLM are moving towards reconciliation after a prolonged period of board-level friction that threatened the viability of the seven-year-old partnership. However, before implementing new steps such as cargo integration, both sides are waiting for the resolution of KLM's opposition to a poison-pill strategy which Northwest's board adopted last November.
In late June, Bouw said that discussions with Northwest president John Dasburg had led him to conclude that the two carriers would reaffirm their vows by signing three to five-year cooperation contracts in the near future. Because of the level of financial and commercial obligations involved, in-depth integration of cargo and other operations had been put off until both sides felt there was long-term commitment to the alliance.
By mid-July, Northwest had not publicly returned such a vote of confidence, as it still was hoping that KLM would drop its two lawsuits against co-chairmen Al Checchi and Gary Wilson. An upbeat Northwest official said: 'The lawsuits need to be dropped for a cordial and productive relationship to evolve. Nevertheless, there has been a change in atmosphere and a coming together.'
Integral to this new cooperative spirit was KLM's symbolic act of selling close to 80 per cent of its preferred stock in Northwest back to the US carrier for $378 million, giving Northwest a tax benefit. Says the source: 'KLM had the right to sell them in the open markets, which would have deprived us of those tax advantages. If they had done that, it would have been another point of contention.'
Mead Jennings
Source: Airline Business
