Therefore we aim to describe the economic, governance and other factors that drove both companies to search for partnership, and to conduct research into the governance choices made in the face of these factors. Furthermore we wish to gain insight into the pitfalls that are met during mergers and acquisitions. Consequently, we try to find out to what extent these findings apply to KLM's situation and to what extent they can be applied to the airline industry or mergers in general. Ultimately we will conclude with the possible corporate advantage that can be attained by the merger in the light of these pitfalls, i.e. how these pitfalls hinder the creation of corporate advantage. .
In our analysis of the merger and its pitfalls we will rely on theoretical frameworks presented during the Corporate Development course. We would like to emphasize that the focus will be on KLM. Moreover, since both companies do not have one but several core businesses (passengers, maintenance, and cargo) we will focus on one business unit: passenger air transport.
ACQUIRE OR ALLY?.
Hoffmann and Schaper-Rinkel raise the question: acquire or ally? According to them companies should ally in uncertain environments, whereas they should acquire in situations with less need for strategic flexibility. In the latter case they should aim to attain economies of scale and scope. In the global airline industry uncertainty plays a major role, but has a peculiar source. The profitability of air transportation is subject to events that take place outside of the realm of power of the airlines and that may have nothing to do with airline management, namely in the fields of politics, terrorist attacks, epidemic outbreaks and so on. Industry evolvement, on the other hand, is largely predictable with perceivable trends such as the start-up of various low-cost carriers and the global concentration of established carriers. It comes as no surprise then that cooperation between airline companies seeks to attain both strategic flexibility and economies of scope and scale.