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Will airline mergers bring better service and lower fares?

On September 30, 2003, Air France announced that it will acquire Dutch airline KLM. While the airlines say that their new alliance will lead to more flight options and better connections, lower prices for consumers, and fewer costs for the carriers, some observers expect the end result to be less service and higher fares. Even if you’ve never flown Air France or KLM, as an international traveler, you could still feel the effects of this new alliance.

How the merger would work

Under the proposed plan, the two airlines will operate as one, aligning their schedules and fares, but they will keep their separate names and national allegiances. This new composite airline would become one of the world’s biggest carriers, competing with American, United, and Delta. KLM, which is currently aligned with Northwest and operates its European flights, will also join SkyTeam, the alliance of Air France, Delta, Aeromexico, Alitalia, CSA Czech Airlines, and Korean Air. This addition would beef up SkyTeam, surpassing the size of American and British Airways’ oneworld alliance, and bringing it closer to the reach of United and Lufthansa’s Star Alliance.

Before you get overly excited about this news, however, you should know that the merger will take months to reach fruition. The airlines most likely won’t begin to combine their businesses until later this spring.

How you’ll be affected

Once the merge is completed, travelers booking with KLM or Air France will be able to purchase one ticket that includes flights on both carriers, giving you more options for getting to your destination. And with KLM in the same alliance as Delta, you’ll be able to earn and redeem Delta frequent flyer miles on KLM flights.

Flyers on Delta, which is already a SkyTeam alliance partner of Air France, also will have new opportunities for nonstop flights from the U.S. to the destinations KLM serves. And if Northwest, currently a partner of both Delta and KLM, should join the alliance as well, its frequent flyers will have new access to flights on Air France.

The airlines indicate that the merger will give customers more flight options, better connections, and potentially lower fares. At the same time, there is always the possibility that once the airlines stop competing and begin cooperating, there won’t be anything to prevent them from raising fares and cutting service. In fact, the U.S. Department of Transportation initially attempted to block an arrangement between Continental, Delta, and Northwest—similar, but lesser in scope—because of concerns that the partnership would be anti-competitive.

Air travelers won’t know if this merger is a good thing, a bad thing, or a mixed bag until the middle of this year. In the meantime, read our articles on the ins and outs of flying allied airlines and the impact of shifting alliances and new codeshare agreements on the traveling public.

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