Air France-KLM plunges most since merger on surprise Dutch stake

Bloomberg

Air France-KLM Group fell the most ever after the Dutch government’s surprise decision to buy a stake in the airline raised concern that competing national interests will derail Chief Executive Officer Ben Smith’s efforts to streamline the carrier.
The Netherlands purchased a 13 percent holding, a move aimed at gaining parity with influential shareholder France following a power clash that left the Dutch side of the partnership weakened. The stock dropped as much as 15 percent in Paris, the most since 2002, when it was just Air France. The current company was created two years later when the French flag carrier merged with its smaller Dutch counterpart.
“The Dutch stake does not make us more positive,” Bernstein analysts including Daniel Roeska said in note on Wednesday. “We worry that national, diverging interests will slow the group down in its much-needed restructuring.”
KLM and Schiphol Airport in Amsterdam are of great importance to the economy and employment, Dutch Finance Minister Wopke Hoekstra told reporters after announcing the investment. He said the government was concerned that decisions on KLM’s strategy more frequently were being made at the level of Air France-KLM’s Paris-based holding company.
“There was simply too little influence from the state in KLM to be able to look after the Dutch public interest well, and to make a success of KLM,” Hoekstra said. “This step shows our long-term commitment to the entire company.”

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The move reignites tensions between the French and Dutch arms of Air France-KLM, just as pressure was easing from a crisis that threatened the job of KLM boss Pieter Elbers. The Dutch head stayed, but Smith gained a seat on KLM’s supervisory board and won a more streamlined power structure that sidelined some of the cumbersome committees that slowed decision making but ensured the Dutch side had some parity.
Hoekstra said the Dutch government, which held a 5.9 percent in the local KLM unit before the recent transactions, wants to reach parity with France, which holds a 14 percent stake in the holding company and as a long-term investor has extra voting rights that give it 23 percent of the vote.
The Netherlands’ group-level stake, which cost 680 million euros, will put the state in a position to ask for board seats at the next general meeting. It won’t qualify for extra voting rights for two years.
Air France-KLM’s board and the French government weren’t informed of the Dutch purchase in advance, French Finance Minister Bruno Le Maire told Les Echos.