Monday 15 October 2018

Hotel chain weighs up buying government stake in Air France

Tourists at the Esplanade du Trocadero near the Eiffel tower, in Paris. AccorHotels is considering buying some or all of the French government’s 14.3pc stake in Air France KLM. Photo: Ludovic Marin/AFP/Getty Images
Tourists at the Esplanade du Trocadero near the Eiffel tower, in Paris. AccorHotels is considering buying some or all of the French government’s 14.3pc stake in Air France KLM. Photo: Ludovic Marin/AFP/Getty Images

Maya Nikolaeva and Sudip Kar-Gupta

Europe's biggest hotel chain, AccorHotels, may buy a stake in Air France KLM to compete better against travel packages offered by online rivals such as Expedia and Booking.com.

France-based AccorHotels said it was considering the move after a report in 'Les Echos' newspaper said it might buy some or all of the French government's 14.3pc stake in Air France KLM.

Shares in Air France KLM jumped more than 7pc in early trade yesterday, as investors bet a sale of Paris's stake could help the airline push through painful reforms that are politically difficult for the state to support.

However, shares in AccorHotels fell more than 4pc as some analysts questioned the logic of a stake purchase.

"While the strategic rationale for Accor is there, we wonder why this cannot be achieved by a commercial partnership without any equity stake," said Bernstein analyst Caius Slater.

AccorHotels, with more than 4,000 hotels ranging from luxury Sofitels to the budget Ibis brand, has in the past held talks with Air France KLM with a view to developing joint projects, including potentially buying a minority stake in the airline.

"AccorHotels confirms having resumed its reflections on the matter, being at very early stage of assessing the feasibility and potential terms and conditions which will be discussed with Air France KLM in due time," AccorHotels said.

"There is no certainty that these initiatives will lead to any agreement nor any form of implementation," it added, without saying from whom it might potentially purchase a minority stake.

Air France KLM and the French finance ministry declined to comment on the 'Les Echos' report.

The Air France KLM airline group was created in 2004 from the merger of Air France and Dutch carrier KLM, but is in turmoil following the departure of CEO Jean-Marc Janaillac after French staff rejected a pay deal and staged a series of costly strikes.

Speaking at the annual meeting of the International Air Transport Association in Sydney, KLM CEO Pieter Elbers also declined to comment on the 'Les Echos' report. But Mr Elbers - a potentially group CEO - added: "Yes, Air France needs to be restructured, yes some interventions need to take place. Progress has been made. Has it been enough? No. Should it be done more? Yes."

AccorHotels' board of directors contains former French president Nicolas Sarkozy - a useful presence for any talks with the government over Air France KLM.

'Les Echos', citing unidentified sources, said the government was studying three options. The first would be to sell its whole stake to AccorHotels. The second would be a partial sale that would keep some state influence at Air France KLM. A third option would be to swap the state's shares in Air France KLM for a stake in AccorHotels - a move the newspaper said would be consistent with French President Emmanuel Macron's desire to have an influence in "national champion" companies.

A government stake in AccorHotels might also deter a potential foreign bid for the hotels company.

Irish Independent

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