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Air fares could rise after merger
LONDON, England (CNN) -- Air France's takeover of rival KLM could lead to higher fares, a consumer watchdog has warned. "This is not exactly a merger but a pooling of resources which could lead to less competition and higher fares," James Fremantle, Industry Affairs Advisor at the Air Transport Users Council, told CNN. Under the new structure outlined by the both airlines, KLM and Air France will retain their corporate identities and together serve 226 destinations worldwide and operate a fleet of about 540 aircraft. (Full story) Air France Chief Executive Jean-Cyril Spinetta said: "This will bring significant benefits to customers, shareholders and employees." The airlines industry stands to lose billions of dollars as the global economy takes time to recover from a downturn. Businesses have slashed travel budgets to cope better with sluggish growth. "This is a unique move by two big players to become one of the biggest airlines," Fremantle said, adding it would take some time before the industry understands how this move will impact consumers. But business passengers are unlikely to change carriers at the expense of convenience. "There is a lot of fine tuning to be worked out but passengers in Britain and Germany may still decide to travel with their national carriers rather than flying to Schiphol (in Amsterdam) and Charles de Gaulle (in Paris)." "Surveys have shown us that business passengers are more interested in flying direct routes and would pay more for the convenience." British Airways, currently Europe's biggest airline, called on the European Union's competition authority to look hard at the impact on competition. "They will need to be vigilant in ensuring the deal does not reduce competition, especially across the North Atlantic," British Airways told Reuters.
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