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November 24, 2006

Brand Naming: Air France, KLM, Alitalia to Join Mile High Club?

KLMFollowing rumors earlier this week that Air France and KLM are getting ready to launch a new brand name low budget airline comes news that Air France KLM and Alitalia are seriously considering at a merger, prompting Air France shares to drop and Alitalia’s to rise.

The question is, what would ultimately happen to the Alitalia brand?

Mark Pilling at Flight International points out that a kind of merger mania is sweeping the airline industry, pointing at the potential takeover of Quantas by a partnership of Macquarie Bank and the Texas Pacific Group equity firm.

Pilling notes that investors are very weary of mergers within an industry that seems to be hardly flying high nowadays, but Air France’s acquisition of Alitalia really would make a lot of sense.

AlitaliaAlitalia is an unprofitable, state-run airline that has huge brand name recognition, but very few happy customers. Earlier this week, the CEO of Ryanair, Michael O’Leary, pointed out that “aside from Greece, only Italy still has an airline that hasn’t been privatized” and was highly critical of the Italian government's involvement with the ailing airline. David Williams noted last month that things have gotten so bad at Alitalia that they are starting to sell ad space on barf bags.

In a very in-depth article, Andrea Rothman notes that the CEO of Air France, Jean Cyril Spinetta, wants to see a “common vision” shared by the two airlines as well as “financial strength” - a good thing since Alitalia has not posted a profit since 2002.

Ms. Spinetta also profiles other recent takeover bids, including US Airways move on Delta, which I wrote about last week. A post yesterday on Ireland.com quotes the Italian Prime Minister Romano Prodi as wondering whether such a merger would “create a big European air transport group in which Italy has also its place, or simply grab the Italian air transport market, which is big and very rich?"

Air FranceMy view is that the acquisition of Alitalia by Air France will make it no less Italian in spirit - I have flown KLM many times and find it to be quintessentially Dutch, just as Air France is suitably refined and French, especially the First Class, which, with its down comforters and Christian Lacroix pajamas, is magnifique.

I would expect the Alitalia brand name would retain its Italian flair and values, should the takeover happen.

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Posted by William Lozito at November 24, 2006 9:52 AM
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