Floatation Schiphol / merger Air France with KLM

22 nov 2005

Summary of a SOBI-report published in Dutch language on 25 september 2003

The stock market introduction of Schiphol, announced by Schiphol-directeur Cerfontaine on 6 September, will be influenced in serious degree by the conversations between KLM and Air France. When control of KLM comes in French hands the Parisian airport Charles the Gaulle will gain. Profits and value of Schiphol will then halve. As a consequence, the State of the Netherlands with its 75% stake in Schiphol-shares will loose approximately 600 mln in stock market value. That is six times the value of the KLM shares that the state owns. Both, in economic and in legal sense, the status of Schiphol as a mainport will be finished when KLM loose its control.

The fall of profits of Schiphol is caused by the disappearing of transit-passengers to Charles the Gaulle, which has a considerable overcapacity as a mainport. As a result, income from airplanes and income from shops will come under heavy pressure. Also income from commercial property will be influenced negatively, but no calculation of that effect has been established in this report. The growing passenger number of the airport from Schiphol in 2002, has only been caused by an incident: the bankruptcy of the Belgian Sabena in November 2001, as a consequence of which the airport of Brussels, Zaventem, lost 30% of her passengers (6 mln) in one year. Approximately 1.5 million has been moved to Schiphol. Without that overflow the number of passengers on Schiphol in 2002 should have been decreased.
Schiphol will also be damaged by the fact that she will be connected on the HSL-net years later than Paris and Frankfurt.

The aviation activities of Schiphol are loss-making for many years already. The profits of Schiphol have been obtained by exploitation of shops and car parking places. For some years commercial property is the most important, and only growing, source of income.
To mask decreasing results Schiphol sometimes has applied new rules in its annual accounts. The last time Schiphol changed the rules was in august 2003 when a revaluation of fixed assets was added to the results, what is contrary to Dutch law. Revaluation of greenness strongly contributed to the results of the first half year 2003.

By cooperation of KLM and Air France both can reduce strong overcapacity of the middle distance fleets. As a result the combination will be Euro 5.4 mrd more worth. Because Air France is two times as big as the KLM 1/3 of this amount, or Euro 1.8 mld, should come to shareholders KLM. (It seems however doubtful that will happens).

Cooperation of the KLM with Sky Team will not have negative consequences on the value of Schiphol, and will have positive effects for the KLM. A merger with Air France on the other hand will have negative effects.

Nieuwersluis, 26 September 2003

P.T. Lakeman,
Chairman SOBI

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