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European Airlines: Consolidation Fever?


After marrying to create Europe's biggest airline, Air France and KLM (KLM) won't have much of a honeymoon. In a complex deal announced on Sept. 30, Air France will take over the Dutch carrier for about $900 million. The two companies predicted the linkup will yield up to $577 million in cost savings over five years and could lead to a wave of other cross-border mergers. But the deal could face close scrutiny from U.S. antitrust regulators. Air France shares plunged 11%, as investors fretted that the combined carrier would be saddled with excess capacity. Unless the company takes a tough line on efficiency, it is unlikely to heighten competitive pressure on other carriers, such as British Airways (BAB) and Lufthansa (DLAKY), to strengthen alliances with smaller carriers. EDITED BY Edited by Rose Brady


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