Société d'Exploitation AOM Air Liberté SA (AirLib) History

Address:

Bureau 324 NBatîment 363BP 854
94551 Orly Aérogare CEDEX
France

Telephone: (33) 49 79 23 00
Fax: (33) 49 79 10 10

Website: www.airlib.fr

Private Company
Incorporated: 2001
Employees: 3,400
Sales: FFr 1.7 billion ($229.62 million) (2001 est.)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation

Key Dates:

1975:: Minerve S.A. is founded.
1987:: Air Liberté is founded.
1990:: Air Outre Mer begins flying; Club Med acquires a 50 percent stake in Minerve and Air Liberté.
1991:: Minerve merges with Air Outre Mer to form AOM French Airlines.
1997:: British Airways acquires Air Liberté.
2001:: AOM and Air Liberté officially merge; Holco takes over the company and renames it AirLib.

Company History:

Société d'Exploitation AOM Air Liberté SA (AirLib) is France's second largest airline. Formed from the merger of long-haul airline AOM with regional carrier Air Liberté, most of AirLib's business involves flying passengers between Paris and provincial destinations. The company also operates long-haul flights to France's overseas territories.

Origins

AirLib can trace its origins to three companies that all started out as charter airlines: Minerve, Air Outre Mer, and Air Liberté. Air Outre Mer merged with Minerve in 1992 to form AOM French Airlines, which merged with Air Liberté ten years later to form Société d'exploitation AOM Air Liberté SA, or AirLib.

Minerve S.A. was established in June 1975 by René-Fernand Meyer, a former fighter pilot. It began flying to the United States in 1983 and eventually ditched its Caravelle jets for more modern aircraft. In its first dozen years, Minerve's principal source of business was Nouvelles Frontieres, France's largest tour operator. In the late 1980s, Minerve briefly ran a one-plane charter operation in Montreal, Canada, but ran afoul of regulations there requiring 75 percent Canadian ownership of airlines.

Air Liberté was founded in 1987. Led by Lofti Belhassine, its largest shareholder was Groupe Aquarius, the tour operator. Subsidiary Air Liberté Tunisie was sold to the TTS group in the mid-1990s, becoming known as Nouvelair.

Air Outre Mer (AOM) was also formed in July 1987; its purpose, to link France with its overseas territories. AOM's first scheduled commercial flight was between Paris and Reunion Island in the Indian Ocean on May 21, 1990. AOM's major shareholder was the Hotavia Holding Group; its CEO and chairman was René Micaud.

Air Outre Mer had a fleet of three DC-10s and 300 employees in 1991. Air Liberté had 500 employees in 1991. In addition to resorts in southern Europe and the Mediterranean, it flew as far as Bangkok and Montreal. Minerve was slightly larger, with 650 employees. In addition to tourist and cargo charters to the Caribbean, the Indian Ocean, and East Asia, Minerve also conducted maintenance for other companies at its Nimes-Garons maintenance center.

Deregulation and Consolidation in the 1990s

In January 1990, following Air France's takeover of UTA, the country's main private carrier, Air Liberté requested scheduled airline status from the French government. It was flying just four planes at the time but had plans to double its fleet within the year and to have 25 aircraft by the end of 1993.

Minerve, with eleven planes and 900 employees in 1990, also wanted to pick up the routes of UTA and the domestic carrier Air Inter, which Air France was likely to shed to defer anti-competitive criticism from the European Commission in Brussels.

Club Mediterranée bought a 50 percent interest in Minerve in April 1990. It soon also acquired a controlling interest in Air Liberté through the purchase of Groupe Aquarius. The French government eventually awarded Minerve and Air Liberté, both controlled by Club Med, thirteen international routes plus Orly-Nice. However, the Gulf War and a global recession had disastrous effects for both the airline industry and travel business in general, and Club Med reduced its holdings in Minerve and Air Liberté in late 1991.

Air Liberté and Minerve were not merged during their brief period with Club Med at the controls. However, on January 1, 1992, Minerve merged with Air Outre Mer to create AOM French Airlines or AOM Minerve (originally, it was to be called Airmust). The combined fleet was just eleven aircraft. Consortium de Realisation (CDR), a unit of the state-owned bank Credit Lyonnais, owned a 70 percent stake and invested $150 million over the next few years to keep the airline flying.

Air Transport World recorded 1994 revenues of $180 million for Air Liberté and $524 million for AOM. In 1995, AOM posted its first profit, FFr31.4 million, on turnover of FFr3.15 billion. Scheduled flights accounted for 73 percent of its business.

AOM carried 2.4 million passengers in 1995. Its long-haul routes stretched to Australia, Peru, Cuba, Los Angeles, and Tahiti; the carrier also connected Paris with Nice in southern France. The carrier operated eight McDonnell Douglas MD-83s and 14 DC-10s. The airline and its subsidiaries, such as maintenance and overhaul unit AOM Industries, employed 2,200 people.

In the mid-1990s, Crédit Lyonnais was undergoing a financial crisis and wanted to unload AOM. Air Liberté seemed a good match. The two airlines were both based at Orly, had similar fleets, and complementary route networks. Although Air Liberté's bid was turned down, in July 1996 the two independents formed a wide-ranging business partnership aimed at helping them compete against Air France and its regional subsidiary, Air Inter Europe, as well as the predicted influx of foreign carriers upon the implementation of the European Union's free trade policy in 1997. AOM and Air Liberté had combined 1995 revenues of $970 million, and the two carried 4.6 million passengers a year.

Foreign Owners 1997-2001

However, Air Liberté was losing money, $180 million in 1995 and $120 million in the fiscal year ending October 31, 1996. In October 1996, British Airways offered £3 million ($5 million) to take over troubled Air Liberté through BA's French subsidiary TAT European Airlines. Other suitors included Virgin Express, Nouvelles Frontieres, and a founding shareholder in Air Liberté, the Rivaud banking group. AOM, itself up for sale due to the government's 1995 bailout of Credit Lyonnais, also tendered a bid.

Groupe Rivaud shifted its support to the BA bid, agreeing to invest FFr190 million and write off FFr510 million in debt in exchange for a 30 percent share. BA pledged to protect most of Air Liberté's 1,300 jobs, maintain its routes, and invest FFr440 million for a 67 percent stake. This bid was ultimately accepted by the court, and BA took over operations on December 30, 1996.

Though BA's French-based TAT subsidiary remained a separate entity, by the end of 1997 it was no longer flying under its own name, and its operations were being unified with that of Air Liberté. This effectively made Air Liberté the country's second largest carrier after Air France, with a fleet of 39 aircraft. Air Liberté penned code-sharing agreements with several other regional carriers to support its own hub at Paris-Orly and also worked out a surprise feeder traffic deal with American Airlines. In December 1997, Air Liberté added service to Madrid, Barcelona, and Lisbon out of its new secondary hub, Bordeaux. AOM was also building marketing agreements, with Sabena Belgian World Airlines, Swissair, and Air Portugal.

In May 2000, BA sold Air Liberté to the Taitbout-Antibes unit of the Marine Wendel group, which was representing SAirGroup, Swissair's parent company. The French shipping group Bollor had owned a 14 percent share in Air Liberté's immediate parent company Participations Aéronautiques. Air Liberté would be the French component of Swissair's Qualiflyer Group, a pool of several European regional airlines.

SAirGroup also acquired AOM and a third French carrier, Air Littoral, and was combining the three into one unit under the Air Liberté name. These units announced combined losses of $320 million for 2000 while Swissair was hit by a financial scandal at home. In an effort to stem the flow of losses, the three French carriers cut routes, including AOM's new link between Paris and the Swissair hub of Zurich.

AOM-Air Liberté Merge in 2001

AOM-Air Liberté (the two carriers were operating as one) filed for bankruptcy in June 2001 after its owners, Swissair Group and the French investment group Marine Wendel, refused to provide it with additional capital. Swissair was the managing owner, though it held a minority share.

As many as 15 proposals to take over the carrier were submitted. AOM-Air Liberté chairman Marc Rochet pitched a plan for a management buyout of the airline that would save 3,000 of the company's 4,500 jobs, while breaking even in two years. On July 27, 2001, the court selected as the new owners the Holco SAS group of investors, led by former Air France pilot and union leader Jean-Charles Corbet. The Holco plan retained 2,706 jobs out of 4,559 and kept 28 aircraft flying from a fleet of 50.

SAirGroup, which owned 49.5 percent of shares, pledged FFr1.5 billion ($200 million) to release it from future liabilities. Taitbout-Antibes was also released from future liabilities. The French government, shaken by massive layoffs in several industrial sectors, organized a September meeting of several French transportation companies to help find jobs for former Air Liberté employees. However, Air France cancelled plans to take on 580 workers after the September 11 terrorist attacks in the United States.

Corbet was shifting the carrier's strategy away from direct competition with Air France into positive cooperation. Air Liberté would also avoid city pairs served by TGV high-speed trains. Executives instead planned to tackle niche markets, both domestically and abroad, including the November launch of service to Algeria, abandoned earlier by Air France.

September 11 turned the expected FFr460 million loss to a FFr620 million one. Net revenues were estimated at FFr1.7 billion. AirLib continued to try to collect a FFr400 million ($55 million) debt it said it was promised by Swissair for exiting the company.

AOM and Air Liberté were officially merged on September 22, 2001. A new logo was unfurled, its colors of blue and orange said to symbolize the sun shining above the ocean. While taking the name Société d'exploitation AOM Air Liberté SA, the company traded as simply "AirLib."

A comprehensive restructuring plan was announced in January 2002. AirLib was switching to a low-cost approach within France. In March 2002, AirLib announced a new no-frills domestic service along the lines of easyJet and Ryanair, two British Isles carriers who had recently been fighting French authorities for the right to bring the concept to France themselves. The new low-fare service was dubbed AirLib Express and offered connections between Paris and several cities in southern France for one-way fares of EUR 29. It was priced to compete with high-speed rail as well as Air France.

The company cut its flights to French overseas territories in half in the summer of 2002 but planned to start new services to Africa and Italy in the fall. AirLib Express, a low-cost unit with flights from Paris to destinations in southern France, was successful enough to lift the company to an operational break-even point by the end of the year.

Principal Divisions: Grandes Lignes; Lignes Outre Mer; Lignes Régionales.

Principal Operating Units: AirLib Express.

Principal Competitors: Air France; easyJet; SNCF.

Société d'Exploitation AOM Air Liberté SA (AirLib) History

Key Dates:

Company History:

Further Reading: