Air France and KLM agree to closer ties as they end power struggle

Air France and KLM have reached a compromise on tightening ties between the airlines, ending a power struggle that had alarmed the Dutch government, staff and shareholders.

Air France also secured a salary agreement with pilots after protracted conflicts, including strikes last year that shaved hundreds of million of euros off 2018 profits, the alliance said.

Details of the deals were not released, but group chief financial officer Frederic Gagey said the Air France-KLM plan should boost the companies' prospects despite high fuel prices and other challenges ahead.

Mr Gagey said the group was "absolutely not" considering merging the two airlines entirely.

The plan includes a new joint "CEO committee" that group chief executive Benjamin Smith hopes will simplify decision-making and save money.

It also involves closer sharing of activities such as purchasing, Mr Gagey said.

Crucially, it allows Pieter Elbers to stay on as KLM's chief executive.

Mr Smith had reportedly pushed for an even closer alliance, which Mr Elbers opposed. That raised concerns in the Netherlands that Nr Elbers would be pushed out and KLM's role diminished.

Mr Smith then met last week with the Dutch government ministers of finance and infrastructure to discuss the future of the alliance.

Dutch Prime Minister Mark Rutte declined to detail what was discussed, but he stressed what was at stake.

"It is unbelievably important for the Dutch economy that KLM functions well," he said.

"The organisation is not in danger, but it is an organisation that, if you compare it with other airlines, is not functioning brilliantly."

KLM went through lay-offs and cost-cutting and is more profitable than Air France, which has faced extended labour disputes.

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