Air France and KLM, flag carriers of France and Netherlands, had merged together to fly higher than others in the European airspace. At the same time, other flag carriers such as Alitalia, Italy’s flag carrier, was treading in troubled waters, with high debt equity ratios. Wishing to reach higher altitudes with competing European airlines, Air France-KLM decided to merge with Alitalia, giving it a helping hand in the process of its turnaround. However, the political and social forces were not open to this idea of letting go Alitalia, the pride and competitive advantage of Italy, though it was loss making for years together.
The case discusses the challenges of AF-KLM in this situation. Will they be able to restructure and compete effectively with Gulf airlines such as Emirates and Etihad? In the meantime the alliance with AF-KLM and Alitalia failed and Etihad got ownership of Alitalia with 49% stake.
SOM, A. (2016). Air France, KLM, Alitalia, Etihad: of Growth in Alliances. ESSEC Business School.