KLM flags BA link as profits plummet

DUTCH flag carrier KLM has given its strongest signal yet that it may tie up with British Airways. Its executives indicated they did not believe the expected waves of consolidation in the industry would leave room for a fourth major European airline outside the big three of BA, Lufthansa and Air France.

KLM said it would suffer significant losses - more than e200m (£124m) - in the current financial year after reporting an 80% collapse in profits in the July-September quarter.

BA and KLM have been given clearance by the European Commission to schedule some flights, such as on the London-Amsterdam route, to ensure they are not needlessly competing when their aircraft are barely half full. The two airlines have long been hotly tipped to get back to the negotiating table after last year's merger was aborted with KLM unwilling to accede to what BA was seeing as a takeover.

KLM finance director Rob Ruijter said: 'Our view continues to be that after consolidation there will be alliances that centre around Lufthansa, BA and Air France. We think it highly unlikely there will be a fourth airline.'

KLM said that with the shock waves of the 11 September terrorist attacks taking e50m off profits in the last three weeks of the month, pre-tax profits in its second quarter came in at e36m. For the first half as a whole pre-tax profits were down e193m to e60m.

Chief executive Leo van Wijk said passenger revenues would fall, resulting in 'a significant operating loss for the year'.