Dutch State takes shares in Air France-KLM: a new shareholding, a new policy?
The Dutch State has bought shares in the French holding company Air France-KLM S.A. to ensure that the Dutch public interest is being taken into account. This new shareholding could mark a change in the Dutch policy on State-owned shareholdings.
In an earlier blog, some of the problems Air France-KLM S.A. have encountered were mentioned. These problems do not only pertain to the companies involved: France and the Netherlands have a special interest in this company. The stakes for the Dutch State are high. Air France-KLM’s subsidiary KLM is a national airline and as such inseparable from the national airport, Schiphol with its function as a regional hub. In recent years, the relationship between France-based parent company Air France-KLM S.A. and its Dutch subsidiary KLM N.V. has become increasingly strained. Friction arose a number of times between the policies of parent Air France-KLM and subsidiary KLM and between France and the Netherlands. An illustration of this is the parent company’s wish to skim off the Dutch subsidiary’s profit after a sharp fall in profit in 2015, in favour of French subsidiary Air France. But the straw that apparently broke the camel’s back was the discussion surrounding the reappointment of the Dutch CEO of KLM, Pieter Elbers. It was rumoured that his reappointment was uncertain, despite good results from KLM under his leadership. Shortly thereafter, the Dutch State announced that it planned to acquire shares in the holding company Air France-KLM and that it would have the same size of shareholding as the French State.
On 26 February 2019, the Dutch Minister of Finance, Wopke Hoekstra, announced the purchase of a parcel of shares in Air France-KLM by the Dutch State. The Minister of Finance explained that: "(...) the Dutch interest is not sufficiently taken into account in important decisions for the entire company, which also affects KLM and the quality of its network. For example, the government was not consulted about the strategic cooperation with Delta Airlines and China Eastern Airlines. Nor were the Dutch State or KLM consulted about the possible acquisition of the French State's shareholding in Air France-KLM by AccorHotels in the spring of 2018.”
The fact that the Dutch State is now a minority shareholder in Air France-KLM S.A. should ensure a certain amount of influence. Obvious questions arise, however, such as the question to what extent the Dutch State has effectively strengthened its grip on the company with this purchase and whether the Dutch public interests involved can be better safeguarded in this way. It is worth mentioning that although the French State and the Dutch State have the same amount of shares, the French State has double the voting rights. Under French company law, a shareholder that holds shares in a company for more than two years is entitled to double the voting rights on the basis of those shares. As a new shareholder, the Dutch State cannot invoke this clause yet.
This share acquisition by the Dutch State is the latest development in the saga of the Air France-KLM company and is noteworthy because it illustrates a possible shift in the general policy of the Dutch State with regard to the participations in private companies held by the Dutch State.
The policy of the Dutch State with regard to its shareholdings is laid down in a policy memorandum (Nota Deelnemingenbeleid). Up to the 1990s, this policy was characterized by the desire to privatize and sell shareholdings owned by the State as much as possible. Following the realization that in some cases government shareholding was desirable, a policy change occurred in 2007. The starting point would then be that the State would keep its shareholdings, unless the safeguarding of the public interests concerned would no longer require this. The common denominator in the shareholding policy from the 1990s up till now is that the policy has always focused on existing shareholdings. No new participations were foreseen, with the exception of the temporary shareholdings necessitated by the financial crisis in financial institutions such as ABN AMRO bank through the NLFI. The policy was therefore silent on the topic of new shareholdings. The purchase of new shares in Air France-KLM seems to indicate a broadening of the Dutch State’s shareholding policy. In addition to an assessment of existing government participation, there is room for evaluating cases in which the new acquisition of shares by the Dutch State may be desirable. Government ownership is thus being revived.