The aviation industry has experienced several fundamental changes worldwide since the early 20th century. One of the most important ones, if not the most important one, was the level of state intervention each player in the aviation industry had or still has to deal with. The role of the state and its policies is closely linked with alliances and M&A activities. This case analyzes and compares two acquisitions in the airline industry, the merger of Air France and KLM to create Air France-KLM Group, and Air France-KLM’s intentions to acquire a significant stake in Alitalia, the struggling Italian air carrier. This case allows applying two concrete approaches to measure the level of state intervention – the World Economic Forum’s Global Competitiveness Index, as well as The Heritage Foundation’s Index of Economic Freedom. The pedagogical objectives of that case are to (a) understand the economics of today’s airline industry and its need to globalize (b) assess and understand the changing roles of the state in the evolution of the worldwide aviation industry since its beginning (c) reflect on what the role of a state should be in general (d) compare the Air France-KLM acquisition to Air France-KLM’s bid for Alitalia, and (e) analyze whether or not Alitalia is a competitive advantage for Italy.
SOM, A. et LOTT, T. (2010). Air France-KLM & Alitalia: preparing national champions for the future. ESSEC Business School.