As a result of the merger, from 2008 on the sustainable annual cost reduction will be EUR580 million, he predicted, compared with EUR385-EUR495 million announced in May (DAILY, May 6).

Air France took over KLM to form Europe's biggest airline group and the European cornerstone of the SkyTeam alliance. The alliance, which meanwhile has accepted KLM partners Continental and Northwest as new members, next year will introduce the associate member status, similar to Star Alliance's regional member system, Spinetta said. "A number of airlines have declared their interest," he added.

The Air France-KLM group managed to increase its net profit by 57% to EUR296 million (US$390 million) in the first six months of Fiscal Year 2005. The profit improvement slowed to 41% in the second quarter as high fuel prices started to eat into margins. In the first six months, the airline spent almost 28% more on fuel, but still unit costs were down 3.1%. Sales grew 9.1% to EUR9.6 billion (US$12.6 billion), and total costs were up 6.6%. Passenger traffic increased 11.6% on 9.3% more capacity, and load factor improved 1.6 percentage points to 79.5%.