KLM & Air France Parting Their Ways?

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There is trouble brewing with the combined Air France-KLM due to the financing needed from their respective national governments.

French and Dutch released their proposals (read more here) on Friday how they would keep the airlines afloat. Dutch money could only be used for KLM, while the French would fund Air France.

2019 results:

KLM’s operating results are roughly triple compared to Air France, although the airline is smaller.

Here’s an excerpt from a Dutch publication FD (access their piece here):

The top of KLM takes into account that the current crisis may mean the end of the marriage with Air France. Crucial for the continued existence of the French-Dutch aviation combination is whether Air France succeeds in drastically reducing cost.

Relations between the French and Dutch at Air France-KLM have deteriorated in recent years, culminating in the struggle around the reappointment of KLM CEO Pieter Elbers at the beginning of last year.

Because both Hoekstra and his French colleague Bruno Le Maire emphasized on Friday that public money should only benefit their own airline, the result could theoretically lead to two nationalized airlines.

Conclusion

The issue is that the Dutch government believes that Air France, which has not been able to clean up the operations from excess costs partially due to the rather militant unions, is dragging the combined entity down.

Dutch and French governments both currently own 14% of the combined airline that will likely need fresh capital in due course.

As the newspaper pointed out, there is an issue between the North and South divide within the European Union that complicates things. More fiscally prudent North (Netherlands part of) don’t want to subsidize the South. Understandably, Dutch taxpayers are not too eager to fund a company whose French part is dragging it down.

The airlines for us passengers are very different. Not sure how difficult it would be to untangle them?

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