Callisto (AMEX:KAL)
Historical Stock Chart

From May 2019 to May 2024

Air France-KLM (AF.FR) isn't looking for mergers or acquisitions at the moment, Peter Hartman, president and chief executive of KLM Royal Dutch Airlines said Tuesday.

"Cash is king" and the company wants to be prudent, especially as the banking system isn't working in the appropriate way, Hartman told Dow Jones Newswires in an interview at the annual meeting of the International Air Transport Association.

Hartman said the focus of its capital expenditure will be on investing in new fleet and IT systems.

"It isn't our priority to become the biggest airline," he said. "Big is not always beautiful" and comes with its own issues, such as the complexities of integration.

KLM has been approached by a number of smaller companies "knocking on the door," hoping to be acquired, Hartman said. However, he said joint ventures and code-share agreements were more likely. KLM's joint venture with Delta Air Lines was a prime example of how a joint venture works and that mergers aren't always necessary, he added.

Air France and KLM Royal Dutch Airlines merged in 2004 to form what is now Europe's largest airline group by sales and number of passengers. The group owns 100% of Dutch low-cost carrier Transavia, Dutch leisure and cargo carrier Martinair and Belgian regional airline VLM, and has minority stakes in Kenya Airways Ltd. (KAL.NR) and Alitalia SpA (AZA-MI).

Hartman said KLM will break even in 2010/2011 on an operating income basis and before fuel hedging is taken into account.

He said the cloud of volcanic ash that covered most of Europe had cost the Dutch carrier EUR10 million a day or EUR80 million. He said KLM was looking for compensation as he considered the event a natural catastrophe.

Since aviation authorities closed most of Europe's airspace, it should be up to them to pay compensation, Hartman said, comparing the event with the oil spill in the Gulf of Mexico, where BP PLC (BP) has been pressured by the U.S. administration to step up compensation payouts to residents whose livelihoods have been shattered.

Air cargo volumes had been hit by the ash cloud as well as passenger numbers, Hartman said. Perishable products like flowers, vegetables, meat and fish had been lost and people had died because organs could not be transported, he added. Cargo accounts for 10% to 15% of KLM's revenue.

Hartman said European regulators should define clearly for what reason compensation law EU261 was originally developed, so customers "don't get the impression that they can claim for everything." He added that EU261 was set up to deal with airlines that failed to deliver services as a result of their own mistakes. He called for a system that is applied globally.

-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com