The Wall Street Journal-20080215-Air France-KLM Backs U-S- Deal

Return to: The_Wall_Street_Journal-20080215

Air France-KLM Backs U.S. Deal

Full Text (390  words)

PARIS -- Air France-KLM SA is prepared to invest in the airline that would emerge from a deal between Delta Air Lines Inc. and Northwest Airlines Corp., a senior Air France-KLM official said.

Air France and KLM, which themselves merged in 2004, already have close commercial relations with Delta and Northwest, respectively. The four had applied for regulatory permission to deepen those relations before Delta and Northwest began merger talks several weeks ago.

Officials at the European airline have said over recent months that they would like their U.S. partners to merge.

Deputy Chief Executive Pierre-Henri Gourgeon's comments Thursday during an analysts' conference call were the first official acknowledgment that the European airlines were actively working to support a deal in the U.S. The Wall Street Journal reported last month that Air France-KLM could provide strategic financial backing for a deal.

Mr. Gourgeon said an investment would depend on the U.S. airlines getting a green light from U.S. regulators to join and create what would be the world's largest airline by traffic.

Mr. Gourgeon declined to say how much Air France-KLM is prepared to invest if the U.S. carriers do merge. According to people familiar with the talks, the investment could be about $1 billion and primarily financial, without any direct management input, although it might entail the European group getting a seat on the merged airline's board.

Delta is pushing for a quick agreement on terms of the European investment, Mr. Gourgeon said. He added that the investment probably won't result in any payments being made by Air France-KLM before the end of the year.

"The timing for a decision would have to be quite soon," Mr. Gourgeon said, adding that an investment announcement would likely coincide with that of the Delta-Northwest merger.

Betsy Talton, a Delta spokeswoman, said Delta wouldn't provide updates on its review of merger possibilities.

U.S. airlines are pushing to merge to increase their heft, cut costs and take advantage of the waning days of the Bush administration's oversight of antitrust issues. A Democratic successor is considered less willing to sign off on deals. The presidential campaign of Sen. Hillary Clinton (D., N.Y.) yesterday called for scrutiny of potential airline mergers, citing the potential ramifications on competition as well as jobs.

---

Susan Carey in Chicago and Paulo Prada in Atlanta contributed to this article.