Share increase to 30 percent: France wants more power at Air France-KLM

The French government is helping the aviation group. At the same time she wants to shift the balance of power at Air France-KLM to Paris and increase the stake to 30 percent.

After Benjamin Smith took up his post as the new CEO, he quickly began to turn Air France-KLM inside out. Among other things, the Canadian planned to dovetail Air France and KLM more closely. But that didn’t suit Pieter Elbers and the KLM boss almost vacated his chair because of it.

There have been cultural differences between the French and the Dutch since Air France-KLM was founded in 2004. The French national airline is far less successful financially than its Dutch counterpart. Divorce rumors were also raised again and again. With the dispute between Smith and Elbers, the differences reached a new high point in spring 2019.

Another injection of funds

The Netherlands responded by taking a stake in the aviation group. Since then they have held 14 percent of Air France-KLM, only slightly less than France, which owns 14.3 percent of the shares. But this balance could soon shift again.

Because like the TV station TF1 first reported and the broadcaster RTL confirmed that the French state wants to give the group another financial injection. To this end, Air France-KLM is planning a capital increase of four to five billion euros in the spring. At the same time, Paris wants to expand its power and wants to increase its share to 30 percent.

KLM should have less to say

Exactly about the question of power, a fierce dispute between France and the Netherlands has flared up again in recent weeks. The French want the headquarters in Paris at Air France-KLM to have more to say. KLM should lose autonomy and have less to say on issues such as the fleet, network or the low-cost airline Transavia. The higher participation should help here.

Of course, that doesn’t go down well in Amsterdam. So it is quite possible that the Dutch government is also considering increasing its share again. A 15 percent stake in the aviation group currently costs just 340 million euros.

Guaranteed Loans and Direct Loans

In the spring, the governments of the Netherlands and France had already supported Air France-KLM once. In April, Paris helped the group with a total of seven billion euros. The aid consists of a four billion loan from a consortium of six banks, 90 percent of which is guaranteed by the government. In addition, there was a direct loan from the state treasury of three billion euros.

The Dutch government supported the group with 3.4 billion euros. On the one hand, the aid consisted of a guarantee for bank loans of up to 2.4 billion euros and, on the other hand, a direct loan from the Dutch government of 1 billion euros. In addition to France and KLM, Delta Air Lines and China Eastern each have an 8.8 percent stake in Air France-KLM.

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