Air France and KLM: an unhappy marriage?

By permission of the European Commission Air France/KLM issues 168 new shares worth almost €1 billion. The exact amount is €988 million. In addition, France has converted a bond - that was due to be paid off - into a loan in perpetuity.

French stake increased

The Netherlands didn’t match the French moves. They kept their share in Air France/KLM at 14%. Thus, all new shares have been bought by the France government. As a result, France’s interest in the airline has increased, whereas the Dutch state’s interest has relatively decreased.

The French stake in the carrier is now just under 30%. This is not by chance. If France would increase its stake to more than 30%, it would have an obligation to make a bid on all shares. Such a development would be politically unacceptable for the Dutch government.

Mutual distrust

Right from the beginning, the Netherlands feared that France would use the merger of the 2 airlines to move flights, jobs and possibly money to France. This would bring Amsterdam Schiphol Airport in a difficult position as the airport would lose its biggest customer, KLM Royal Dutch Airlines. Such a development would be unacceptable for the Dutch government.

Positions of KLM and Schiphol

Last year, the French and Dutch governments agreed that France will not jeopardize the positions of KLM and Schiphol Amsterdam airport. Therefore, the Dutch consider their interest to be safe. But that assumption may be too optimistic.

Board of directors

Since the Dutch increased their stake in Air France/KLM to 14%, they have been trying to get a second seat in the board of directors (that has 19 seats). So far, the Dutch failed to secure that seat, even after they had increased their share in the carrier’s capital to 14%.

Moreover, it is an open question whether 1 additional seat would give the Dutch more influence. The vast majority in the board of directors are French.

Related: Will Air France/KLM split?

Tags: AirFrance, KLM, CorporateCapital

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