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June 24, 2021

Five Star Travel Blog

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Travel News: Dutch Government Increases Stake in Air France KLM Investment

2 min read

In a surprise move that has irked the government of France, the Dutch government has upped its stake in Air France-KLM to 12.68%.

The Dutch Ministry of Finance said in a statement that its goal is to obtain a position similar to the French state, which owns 14.3% of the Air France-KLM holding company. The Netherlands began buying the shares on Feb. 20.

“Through its shareholding, the Dutch government wants to be able to exercise direct influence over future developments at the Air France-KLM holding company to ensure that Dutch public interests are optimally assured,” the Dutch Ministry of Finance said in a press release.

The ministry went on to say that the health of KLM and Amsterdam Airport Schiphol are key to the Dutch economy. However, in recent years, critical decisions about KLM have increasingly been made at the level of the Air France-KLM holding company. The carriers joined into a single air group in 2004 but still maintain separate networks and brands.

“With the acquisition of shares in Air France-KLM, formal influence has now been obtained at the highest level within the holding company, and the public interests of the Netherlands are better secured in future decision-making,” the Dutch Ministry of Finance said.

The announcement stoked strong reactions in France. The Paris newspaper Le Monde called the move “a declaration of war.”

French minister of finance Bruno Le Maire told the paper that the Netherlands made the move without notifying the government of France or the Air France-KLM board of directors.

The move reflects growing frustration by the Dutch half of Air France-KLM. The airline group has been held back by labor strife and weak performance by Air France. In 2018, KLM had an operating margin of 9.8% versus Air France’s margin of 1.7%.

During the first half of 2018, 15 days of labor strikes at Air France led to the resignation of Air France-KLM CEO Jean-Marc Jenaillac, who was replaced by a former top Air Canada executive, Ben Smith, who in October negotiated an agreement with the majority of Air France’s unionized employees.

More recently, reports circulated that the Air France-KLM board was considering removing KLM CEO Pieter Elbers due to a perceived lack of support by Elbers of Smith’s plan to increase collaboration between Air France and KLM. But last week, the Air France-KLM board recommended the renewal of Elbers’ contract.

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