Air France plunges as Dutch government buys stake
Shares in Air France-KLM fell sharply after the Dutch government said it would take a 14% stake in the airline, highlighting tensions between France and the Netherlands over control of the company.
Air France-KLM shares were down by nearly 12% which analysts said reflected worries that governments’ competing interests may run contrary to those of investors.
“Air France-KLM risks becoming a political football between two governments,” Liberum analysts said.
Late on Tuesday, Dutch Finance Minister Wopke Hoekstra announced the Netherlands had taken a 12.7% stake for €680m and aimed to increase that to about 14%, to counterbalance the French government’s stake.
The move, which took the French by surprise, came weeks after a confrontation between the Dutch government and the company’s French-dominated executive board over waning Dutch influence.
Although Air France and KLM merged back in 2003, the KLM subsidiary has always maintained an independent corporate structure within the group.
With the backing of the Dutch government, the KLM subsidiary has balked at attempts by Air France-KLM group’s new Canadian CEO Ben Smith to move toward deeper integration.
Liberum analysts said that while the stake-building by the Dutch government appeared to have supported the share price over recent days, hopes that the French government would sell its shares now look unjustified.
“We view this development as negative,” they wrote. “Government interference is unwelcome and likely to be contrary to investors’ interests.”
Delta Airlines and China Eastern Airlines each also hold an 8.8% stake in Air France-KLM.
Mr Smith travelled to the Netherlands for a reportedly uncomfortable meeting with the Dutch finance minister before an Air France board meeting.
Sources close to KLM said Mr Smith’s dismissive attitude toward Dutch government concerns about the importance of Amsterdam’s Schiphol Airport in the group’s future may have played a role in the government’s decision to act.
