Discuss the nature and strategic relevance of the Air France-KLM merger. Should Air France-KLM create new partnerships or acquisitions?

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AIR FRANCE – KLM: RULING THE SKIES
Discuss the nature and strategic relevance of the Air France-KLM merger.
Should Air France-KLM create new partnerships or acquisitions?

On 5 May 2004, despite great opposition of industry experts the French airline Société Air France (Air France) and the Dutch Koninklijke Luchtvaart Maatschappij N.V. (KLM) created the world’s largest airline group by turnover named Air France-KLM. The merger represented the first consolidation of two national flag carriers in the aviation history, where alliances were a traditional way of co-operating. This essay will concentrate on discussing the nature and strategic relevance of Air France-KLM merger by analysing the relevant relational actors in their industry
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The merger arguably had a positive impact on the whole Skyteam alliance as it strengthened their competitive position through KLM as well as its former alliance of Continental Airlines.
In terms of indirect vertical relations perhaps the biggest advantage of the merger was achieving economies of scale and being able to offer more competitive prices to compete with the potential less expensive means of transportation and shipment of cargo.
In addition to the classical relational actors some of the condition setting parties in the broader environment also held significant importance in strategic relevance of the Air France-KLM merger. The contextual actors can be identified by employing the classic SEPTember distinction, consisting of socio-cultural actors, economic actors, political actors and technological actors.
Socio-cultural actors played a significant part in the Air France-KLM merger. Firstly, the industry experts’ view was that the downsides of the merger such as reconciliation of the two different corporate cultures (the French and the Dutch) would outweigh the upside. This was heavily publicised in the media which resulted in stock prices dropping 7.4% in the week of the announcement. Consequently the CEOs of the two airlines had to work tirelessly trying to convince analysts, stockholders and public

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