KLM and Air France in tie-up

KLM and Air France today announced a deal which effectively sees Air France acquire its smaller rival for £545.5 million.

The deal creates a carrier with more than 100,000 employees, two large hubs, two complementary networks, aggregated revenues of £13.3 billion and 226 destinations.

Despite Air France being the dominant partner, both airlines will retain their national identities, logos and brands.

Air France chief executive Jean-Cyril Spinetta said the combined airlines could save £417 million a year through sales, network and IT synergies. He described reports of job losses as "absurd”.

His KLM counterpart, Leo van Wilk, said: "Through this partnership and our subsequent expected participation in the SkyTeam alliance, we are confident we have secured a sustainable future for our company.”

As part of the deal KLM will become part of a significantly strengthened SkyTeam alliance but will retain its deals with Northwest and Delta Airlines.

Current KLM shareholders will own 19% of the company, the French state 44% and existing Air France shareholders 37%.