Air France and KLM merged in 2004 but continue to operate largely separately, while the French arm in particular has struggled with industrial action in recent years (LIONEL BONAVENTURE)

Paris (AFP) – Shares in Air France-KLM plummeted on Wednesday, a day after the Dutch government announced it was buying a stake in the troubled airline in a bid to match the French state’s influence.

France has reacted testily to the surprise intervention by the Netherlands, which said it needed to protect Dutch interests after a series of rows about the alliance’s management.

The company’s stock price slumped 11.6 percent to 11.25 euros an hour after the opening of the Paris CAC 40 exchange, which was down more than 0.3 percent. 

The Dutch purchase of the 12.68 percent share — which puts it on course to match France’s own holding — threatens to reignite tensions after a bitter dispute about the fate of the chief executive of the group’s Dutch arm.

“With this share purchase, the Dutch cabinet wants to be able to directly influence the future development of Air France-KLM in order to optimally ensure the Dutch public interest,” Dutch Finance Minister Wopke Hoekstra said Tuesday.

“The aim is to eventually get to a position equal to that of the French state,” which has a 14.3-percent stake, Hoekstra added.

The move stunned Paris, with Economy Minister Bruno Le Maire saying the Dutch government had not informed the French state.

“It is essential to respect the principles of good governance and for Air France-KLM to be managed… without state interference,” Le Maire said.

Analysts at Societe Generale said that while the Dutch swoop would likely be positive for competition within the alliance, it “could lead to escalating tensions and the company becoming even more political”.

“The Dutch government will now seek representation on the board,” the analysts said.

“The fact that the Dutch will continue to buy shares could support the stock price in the short term.”

The Dutch state previously had a 5.9 percent stake in KLM but started buying more shares in the alliance on February 20, spending 680 million euros ($771 million). 

It will cost around a further 70 million euros to reach the French level, according to broadcaster NOS.

Air France and KLM merged in 2004 but continue to operate largely separately, while the French arm in particular has struggled with industrial action in recent years.

– Power struggle over KLM chief –

French Budget Minister Gerald Darmanin on Wednesday called on states to interfere in the alliance as little as possible.

“We must have good relations with our friends from the Netherlands,” Darmanin told Europe 1 radio.

“It is especially necessary that the states are involved as little as possible in the running of a large company like this,” he said.

“We must let the people of Air France-KLM work.”

The Dutch government stepped into the fray in recent weeks when it officially backed the reappointment of KLM chief executive Pieter Elbers, after doubts arose that he would keep his job.

Elbers was reappointed earlier this month after KLM workers protested and threatened to go on strike if he was axed.

Canadian Ben Smith took over Air France-KLM as its first non-French chief executive in September after the rapid exit of former CEO Jean-Marc Janaillac in a bitter dispute over wages at the French arm.

The company kept Elbers in his Dutch role but Dutch news reports said that Elbers was seen as “difficult” and standing in the way of Smith’s plans to merge the two arms more closely.

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