Air France-KLM to Track BA With M&A-Friendly Management Plan

Air France-KLM Group plans to expand the role of its holding company to encourage greater integration between the French and Dutch units and allow for the possible acquisition of carriers including Alitalia SpA.

Under the structure, Chief Executive Officer Pierre-Henri Gourgeon will remain as group head while relinquishing the top job at Air France to a new appointee, whose role will match that of the current KLM CEO. The holding company would also take over functions such as information technology, financial management, purchasing and alliances, spokeswoman Brigitte Barrand said.

Europe’s largest airline was formed from the 2003 takeover of KLM Royal Dutch Airlines NV by Air France, which asserted its seniority via a three-executive holding company with a French chairman, Jean-Cyril Spinetta, and a CEO still linked to the French unit. The new model will resemble one created with the January merger of British Airways and Iberia, where ex-BA chief Willie Walsh heads International Consolidated Airlines Group SA, a neutrally named company designed to facilitate further deals.

“The airline wants to evolve to create a real holding company because if we want to have other airlines within the group it makes sense to develop that,” Barrand said today by telephone. The holding structure will remain based in Paris and will be run according to French law, she said, confirming comments from Gourgeon to French newspaper Les Echos, though it’s not clear whether it will take on a new name.

Slot-In

One prospective addition to the group is Alitalia. Air France-KLM agreed to buy 25 percent of the Rome-based carrier in January 2009 and has the right to buy any stock sold by its fellow shareholders, CAI and a group of Italian investors.

“It’s a trade-off between keeping it lean and wanting to keep it controllable, but it seems to make sense,” said Jonathan Wober, an analyst at Societe Generale SA in London who recommends buying Air France-KLM (AF) stock. “If you wanted to bring in Alitalia or other airlines, this kind of more central group structure would allow you to slot something in.”

Leo van Wijk is vice-chairman of Air France-KLM’s board and the sole Dutchman in the holding company. Peter Hartman is CEO of KLM.

Air France-KLM, which is allied to Delta Air Lines Inc. (DAL) in the SkyTeam group of carriers, rose as much as 1.2 percent to 10.96 euros and was trading at 10.88 euros as of 2:10 p.m. in London, paring the stock’s slump this year to 20 percent and valuing the company at 3.26 billion euros ($4.7 billion).

IAG has lost 8.6 percent since its trading debut in London on Jan. 24 and is valued at 4.79 billion pounds ($7.7 billion).

To contact the reporters on this story: Andrea Rothman in Singapore at aerothman@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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