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Air-France KLM: The Netherlands surprises France by taking an interest in an airline

The top of a plane, sporting the AIR FRANCE logo, occupies the bottom third of this photo, while a blue KLM plane hovers over it.

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The surprise announcement touched the course of action and shocked French politicians

France reacted coldly to the sudden acquisition by the Dutch government of a stake in Air France-KLM with the aim of countering French influence.

The airline's shares fell 11% after the Dutch government said last Tuesday that it was acting to protect "Dutch interests".

The Dutch bought a 14% stake, aiming to equal France's share to 14.3%.

French Finance Minister Bruno Le Maire insisted that society should be "managed without national public interference".

The Dutch movement started on Tuesday with a first acquisition of 12.7% of Air France-KLM shares.

According to French information, the Paris government would have been informed of the Dutch move an hour before a press conference on Tuesday evening, and after the purchase of the shares.

A ministry source told the AFP news agency that the Dutch movement was both "surprising" and "hostile", more like traders than a state shareholder .

The Dutch government then increased its stake on Wednesday to 14%.

French President Emmanuel Macron said the Dutch government should "clarify its intentions".

What the Dutch say

"By buying this stake, we have a place at the table," said Dutch Finance Minister Wopke Hoekstra, about the initial transfer, which cost about 680 million euros. By the end of Wednesday, he had spent 774 million euros.

The rationale, he said, was to protect Dutch economic interests and jobs, especially with regard to Schiphol airport in Amsterdam. Schiphol is the third airport in Europe after London Heathrow and Paris Charles de Gaulle.

KLM is more profitable than its French counterpart and retains broad public support for its reputation as a national carrier. The King of the Netherlands, King Willem-Alexander, even regularly acts as co-pilot on the company's aircraft in order to retain his pilot's license.

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King Willem-Alexander flies twice a month as co-pilot of KLM.

In the Netherlands, widespread political support for the purchase of secret shares. Sybrand Buma, CDA leader, center-right, said this was "of great importance for a solid future for KLM".

Hoekstra is expected to meet his French counterpart later this week. The spokesman of the French government, Benjamin Griveaux, predicted that this would be a discussion "frank but friendly, but especially frank".

Why this surprise gesture?

Air France-KLM was created following the merger of the two national carriers in 2004, but the airlines themselves continued to operate under separate banners.

Until now, the Netherlands only held 6% of the capital of KLM – the smallest subsidiary – while France held 14.3% of the parent company.

The surprise decision by the Dutch came after a series of disagreements in which the Dutch felt they did not have enough influence in the holding company, which was deciding its strategy.

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Divergences between the holding company and the management of KLM – mainly on the autonomy of the Dutch airline – have been made public over the past year.

The strikes in France in 2018 led to company-wide losses, much to the frustration of KLM. A Canadian CEO, Ben Smith, was appointed to the holding company and seen as an attempt to assert greater authority over the Dutch subsidiary.

In recent weeks, reports have revealed that KLM's CEO, Pieter Elbers, could be threatened because of his strong support for the separation of the two operations.

Last week, the group announced a "goal of simplification and improvement of governance", which includes increased collaboration.

The French financial newspaper La Tribune called the sudden movement of the Netherlands "love at first sight", while Le Monde called it "stock market blitzkrieg".

Air France-KLM's board of directors was due to meet on Wednesday to discuss the fallout.

Delta Air Lines and China Eastern Airlines each hold 8.8% of the company's capital.

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