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KLM, British Airways Talk Merger

July 13, 2000

AMSTERDAM, Netherlands (AP) _ KLM Royal Dutch Airlines and British Airways expect to file a proposal for a full merger with European regulators by the first week in August, The Financial Times reported Thursday.

But a KLM spokewoman, Sandra Maas, said when asked about the report that the airline doesn’t comment on the timing or deadlines in the talks.

She confirm, however, that the airlines’ exclusivity agreement, which prohibits alliance talks with other companies, expires early next month.

British Airways spokesman Michael Blunt refused to comment on the report, but added ``The talks remain preliminary. There is no guarantee of a transaction at the end of the day.″

KLM and British Airways disclosed June 7 that they were in negotiations to create the world’s third-largest airline.

The Financial Times quoted KLM chief executive Leo van Wijk in Thursday’s report as saying the airlines ``are aiming for a full merger. That is the basis for our discussions.″

European airlines are under increased pressure to consolidate following deregulation of the regional market and intensified competition. Analysts are predicting wave of mergers resembling the consolidation of the U.S. airline industry.

British Airways is the fourth-largest airline in terms of passenger traffic, while KLM ranks 12th. A merger attempt in the early 1990s broke down over how to value the two airlines.

The Financial Times report quoted bankers close to the KLM-BA talks as saying the Dutch airline has softened its demand for up to 30 percent of a merged group.

Van Wijk dismissed concerns that a merger would lead to more than 15,000 job cuts, but said a deal would lead to more than $940 million in cost savings, the newspaper said.

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