Company Watch - Air France-KLM.

Oct 9, 2006

Air France announced a reduction of its fuel surcharge following a 30-day stretch during which oil prices remained below $65 per barrel. Effective on tickets issued from today, the surcharge will drop [euro]7 ($8.90) on long-haul flights, [euro]2 on medium-haul flights and [euro]1 on domestic flights. Oct 6, 2006

Air France-KLM merger could deliver up to [euro]1 billion ($1.27 billion) in savings to the airlines by 2009, double the initially anticipated cost benefit of [euro]500 million, Air France KLM Vice Chairman and KLM President and CEO Leo van Wijk told Dutch magazine Zakenreis. Since the 2004 merger, the carriers have realized savings of [euro]660 million, he noted. He also revealed that he is considering relinquishing his titles at KLM when his contract expires in May 2007 in order to take a strategic role in the merged company. He said he expects to be replaced by Deputy CEO Peter Hartman, who will retain a purely operational role as head of the Dutch entity. Final decisions will be taken later this year. Oct 5, 2006

Air France-KLM's top 20 managers will meet later this year in order to "reflect on what the 'grand plan' should be for next year and how we can take the next steps," Van Wijk said. He did not rule out further integration, "but there must be good reasons for that." Possible investment in China will be on the agenda, while he reiterated that the company would consider a stake in Alitalia if the airline is privatized and profitable. Oct 5, 2006

KLM will switch over to the same IT system as Air France next year, allowing sales on a common platform. Oct 4, 2006

Air France KLM Sees Additional Savings. The 2004 merger of Air France and KLM could produce double the initially anticipated cost savings of EUR500 million euros (USD$635.3 million), the chief executive of KLM was quoted as saying on Wednesday. Van Wijk said the merger between the French and Dutch airlines had already saved EUR660 million and added that the top 20 managers of Air France and KLM would meet later this year to assess progress and look to the future. Van Wijk said areas of potential cost saving include joint maintenance of both airlines' Boeing 747s at Schiphol and that of A380s in Paris. Oct 4, 2006

Air France KLM's Van Wijk when asked about further consolidation in the airline industry, said the company wanted to invest in China, which he said would be the biggest aviation market in 10 years, and also remains interested in Italy's Alitalia. Van Wijk reiterated that Air France KLM could consider taking a stake in Alitalia if the airline was privatized. Oct 4, 2006

Air France-KLM Group[acute accent]s seat capacity for the winter 2006/2007 season will grow overall by 3.6% compared with last year, 3% increase on the long haul network and 5.7% on the medium haul routes. Both airlines will expand to long haul destinations, particularly Latin America (up 9.5%) and Asia (up 6.1%). Capacity to Africa and the Middle East will be increased by 2.1%. For North America it remains more or less the same but for the French Caribbean and Indian Ocean destinations there is a reduction 1.9%. On the medium-haul network, Air France is boosting capacity mainly to Eastern Europe. Gatwick - Nantes and Dublin - Bordeaux services are being dropped. The airline will run seven flights a day between Dublin and Paris and three a day between Edinburgh and the French capital. http://www.airfrance.com Oct 2, 2006

Air France KLM's Van Wijk said the Franco-Dutch airline expected to invest much of the merger savings in new planes, noting that KLM had several Boeing 747s that were 25 years old, the company needed to replace MD-11s and Air France is buying new A380s. Oct 4, 2006

Air France KLM dampened talk of a rapid merger with Alitalia in August, after the Italian flag carrier said a new plan was needed to turn the company around after abandoning a promise to turn a profit in 2006. Oct 4, 2006

Austrian Airlines To Raise USD$445 Mln After Losses. Loss-making Austrian Airlines plans to raise EUR350 million euros (USD$445 million) in a rights issue backed by key shareholders to underpin a return to profitability, the carrier said on Tuesday. Austrian Airlines said it will offer up to 68 million new shares in the rights issue at close to market prices, probably this year. The Austrian government and a group of Austrian banks will fully subscribe to the issue, Austrian said. Austrian had a net loss of EUR129.1 million (USD$164.2 million) last year and in July scrapped its plan to break even this year, predicting another loss as fuel prices rose. The carrier could not even hedge against high fuel prices recently because its share capital base was too thin to underpin such hedges. Austrian media speculated for months that a bigger rival could buy a stake in Austrian and inject fresh cash, mentioning Germany's Lufthansa and Air France as potential buyers. But Austria's government as well as the chief executives of several large companies said an independent Austrian Airlines with its central European network was an important factor for Vienna as a financial and business hub for the region. Austria owns 39.7 percent in the struggling carrier. A consortium including Bank Austria Creditanstalt, Vienna Insurance Group, Raiffeisen Zentralbank and BAWAG P.S.K. owns 10.3 percent. Oct 3, 2006

Editor: Aram Gesar, eMail: [e-mail]

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Oct 2, 2006