NickB

Let us start wit the last point first. You seem to constantly mix up different things. If your point is that the composition of the Board should reflect the share ownership, then the fact that mistakes have been made by the leadership team in the past is 100% irrelevant. You are not going to hold the view that shareholders should be deprived of their right to elect members of the Board if the ones they had previously elected were not good.
Similarly, the fact that KLM has generated more income than AF within the group is also a completely irrelevant factor: you are presumably not suggesting that shareholders should be excluded from the process of designating members of the Board and that, instead, each of the two main components of the group should have representatives proportionately to their contribution to the income of the group.

So, once we have excluded irrelevant considerations, let us now turn to the main assertion, namely that the Board is essentially overwhelmingly controlled by representatives of the French state. Your assertion seems premised on the assumption that French nationality equals being a stooge of the French state. IMO, this is a gross exaggeration. If we look at the composition of the Board, out of 19, there are seven members with a French public sector management background: Couderc, Aulagnon, Bouillot, Comolli, Idrac, Lepage and Vieu. Of these, one is a French state rep (Lepage) and two are French state nominees, albeit appointed by shareholders (Comolli and Vieu); the other 4 are "independent" members appointed by the shareholders. Even on the (reasonable) assumption that the French public-sector background independent members of the Board are likely to often align with the position of the French state, this undoubtedly give the French state a dominant voice but this is not tantamount to give a single shareholder the power to dictate.

In terms of nationality, 11 of the 19 members of the Board are French. Is that really that disproportionate, especially bearing in mind that 80% of the capital of AFKL came from AF shareholders and 20% from KL shareholders?

Now, don't get me wrong. I am not blind to the dysfunctions that French-style corporatism can engender and the history of AF management provides us with its fair share of examples but let us not over-obsess treat this as the be-all and end-all of AF problems.

That said, personally, I do not see a rebalancing towards greater Dutch interest as necessarily a bad thing although I am concerned that the context of it feels a little too much like building walls to preserve one's own little corner into a fortress rather than a positive engagement with the future of the company as a whole but time will tell and it is re-assuring that there seems to be a willingness on both sides this weekend to de-escalate the tension.

carnarvon

Dear Nick B.

The MD of Air France / KLM is appointed by French politicians. This is plain wrong. French politicians are proven inept managers.

They may have chosen the right guy with Ben Smith, but in the past they have prevented the same right guy who wanted to do the right thing from acting.

The Dutch stake in AF/KLM may help change this.

brunos

I never said that Board representatives should be proportional to the income of each airline. But I am a strong believer that the Board should be representative of the shareholders. The fact that AF shareholders represented 80% 15 years ago is irrelevant today..It is hard to get a full picture of the shareholding structure today, especially as we don't know where the 14% shares acquired by the Dutch State come from. But it is clear from historical sources that French holders (including the State) are now less than 40%. Where we disagree is that I believe that the French State has an undue direct and indirect influence on AFKL strategic decisions. I am not good at the game of using shortcut terms to describe that influential power (maybe dictate is too strong), but there is no doubt in my mind that the French State can veto any strategic decision they don't like and exert huge influence on any strategic decision or top appointments. And AF unions always consider that the decision maker of last resort is the French State.
That has to change. If the Dutch State action allows that to happen, I am happy with it.

NickB

... and yet you were arguing that KL and/or Dutch interests were under-represented on the Board. You have to make up your mind: either you consider that the Board should be representative of shareholders or you consider that it should be representative of the constituent units of the group. If it is meant to be representative of shareholders, then why would having 5 Dutch nationals out of 19 Board members (i.e. 26% of the Board) constitute under-representation? Do you have any reason to believe that, prior to the recent share acquisition of the Dutch state, more than 26% of the capital of Air France KLM was held in the Netherlands? That is why I referred to the initial distribution of the capital, as it gives an idea of where we started from. No doubt that we have departed from that in the next 15 years but I cannot see any reason to assume that Dutch holdings in the AFKL capital would have significantly increased in the meantime. The fact that KL performs better does not, in itself, change anything to the distribution of the capital of AFKL.

"undue" is a value judgment so I will refrain from formulating views on that but I do not disagree that the French state has a major influence on AFKL strategic decisions. What I would question is your assertion that it controls an absolute majority on the Board or, for that matter, of the shareholders AGM. While its share of votes at the AGM exceeds its actual shareholding and its influence on the Board exceeds the 3 members the nomination of which it formally controls, in neither case does the French state have an absolute majority. The influence that it has is conditional on the acquiescence of other shareholders.
What gives the French state more de facto control is the dispersion of the rest of the capital. There is nothing unusual about a shareholder with less than 20% of the votes having de facto control when the rest of the shareholding is dispersed, whether the major shareholder is public or private.

The French state will still control over 20% of votes at the AGM, which will be more than anybody else. It will therefore retain a major influence on strategic decisions or top appointments. Sure, they may be more consultation/discussion with the Dutch government than before but the idea that the French state will just sit in the background as a passive investor is just not going to happen, certainly not in the Macron era at any rate.

johan rebel

The Dutch Secretary of the Treasury seems to have become a somewhat unlikely national hero as a result of the stock purchase.

The Dutch apparently greatly appreciate his willingness to stand up to those perfidious French.

Johan

brunos

The story has all the making of a good Netflix series:
Season 1: Spinetta era
Season 2: PHG, AdJ, JMJ
Season 3: BS and Dutch

What will happen next? A new episode is released every Friday...

Nicc HK

Just as an aside because certain posters raised the BA/KLM merger discussions, here is some background. I was working with an investment bank which was one of the advisors on the proposed deal, and none of the information below is confidential.

1. KLM wanted 40% of the JV venture, BA were prepared to offer up to 33%. KLM settled for 20% of the AF/KL venture, and BA was way more valuable.
2. The KLM board wanted very specific and significant director’s ‘rights’ and ‘perks’. BA was not prepared to grant these, but AF did agree.
3. There was an issue over the BA/AA and KL/NW ventures, though this is something I don’t know too much about. (Edit-NW shares in Continental?)

BA usually gets the blame for the failure in this proposed merger (and probably quite rightly so for the later Swiss debacle), but I think there was plenty to go around for everyone here. In hindsight, and a personal observation, perhaps a BA/KL merger might have been the better choice as BA would not have insisted on the ‘balances’ between AF and KL inbuilt to the AF/KL venture which seem to be at the heart of the issues between AF and KL.