New AF/KLM CEO killing the one part of the company that makes money?

[Aso]

Interesting times in KLM/AF... The new CEO is trying to get full control of the company and in doing so creating big upsets @KLM at all levels as all the staff is behind the current CEO who has been doing a great job... That is interesting as the losses and problems are at the AF side. Get the popcorn out as it will become very nasty as the Dutch have learned from the french that striking is the way to get your way in KLM/AF.

The KLM/AF CEO is today in the Netherlands on a secret (!) mission to get the pilot union on his side..

[ExDubai]

Interesting times ahead...
https://www.bloomberg.com/news/articles/2019-02-11/air-france-klm-s-dutch-arm-goes-to-battle-over-unit-ceo-elbers

[fab777]

"The new CEO is trying to get full control of the company"

Is that strange? We could re-formulate like this: the dutch side does not want the group's CEO to control them.

[sekmeth]

"The new CEO is trying to get full control of the company"

Is that strange? We could re-formulate like this: the dutch side does not want the group's CEO to control them.
its not that! The dutch side knows that without a partner, KLM would be much smaller then it is today, what the dutch dont want, is to make up the losses from their french colleagues, leaving no money to invest in their own product.
and why do the french lose money? Hint: allergy to work —> eager to strike.
and no: im not in KLM, im flying for the LH group

[arketip]

its not that! The dutch side knows that without a partner, KLM would be much smaller then it is today, what the dutch dont want, is to make up the losses from their french colleagues, leaving no money to invest in their own product.
and why do the french lose money? Hint: allergy to work —> eager to strike.
and no: im not in KLM, im flying for the LH group

Yes, never heard of a strike at LH:rolleyes:

[sudden twang]

If only it had been BA KLM.

[tocamak]

You only have to look at the comparison in operating results over the last 5 years to see why KLM employees would be unhappy at a change at the top. There have been big efforts across the company to get past the effects of the recession and fight off the unfair competition from further east. The person at the top in my opinion has been critical to this success so far.

[Hotel Tango]

Yes, never heard of a strike at LHhttps://www.pprune.org/images/smilies2/icon_rolleyes.gif

The poster stated he/she worked for the LH Group. That does not mean he/she is LH crew! Don't confuse LH and the LH Group! Yes LH have had strikes, but other carriers within the group were not part of the industrial action.

[arketip]

The poster stated he/she worked for the LH Group. That does not mean he/she is LH crew! Don't confuse LH and the LH Group! Yes LH have had strikes, but other carriers within the group were not part of the industrial action.

Yes, true, maybe he works for Swiss, you know the successful one that went bankrupt...;)

[fab777]

and why do the french lose money? Hint: allergy to work —> eager to strike.

I will teach you something today: there are lazy germans, I know one of them. There are also french who cannot cook, dutch who will not win a bargain, italians who can talk with both hands tied.

thus you may drop that idea that french are just "lazy"

(And also have a look at AF-KLM group's financial datas)

[overfly]

Good to read such harmony among different countries and airlines of the EU.
Now do people see why 'ever closer union' won't work?

[Asturias56]

If only it had been BA KLM.
be the same as Unilever or Shel.. the dutch would run it....

[ATC Watcher]

The parent company is considering (https://www.bloomberg.com/news/articles/2019-02-08/air-france-klm-is-said-to-weigh-changing-dutch-head-for-new-era) replacing Elbers over concern he may not fully support plans to strengthen ties between the two carriers, which came together in a 2004 merger yet have long operated semi-independently and suffer a cultural divide.
It is not only the French and Dutch cultures clashing , it is also adding the Canadian one and possibly a longer term global vision that definitively AF did not have.

[geriatrix]

If only it had been BA KLM.
Or AZ KLM as was meant to be! :-)

[BedakSrewet]

Or should have stayed 'single', with SQ as an succesful example....

[fox niner]

Good to read such harmony among different countries and airlines of the EU.
Now do people see why 'ever closer union' won't work?

Depends on what you want to unite. Right now the AF-KL relationship is more like a colony that is being exploited, Just to keep the home country population happy.
The EU as an economical entity exposes deep problems in France, where yellow jerseys protest because the economy of France can not keep up with northern EU members.
Makes this “battle” quite explosive, full of politics.

[Bidule]

I am not sure that you understand the yellow jerseys protest....
So, maybe better to keep on aviation facts and as said by fab777, look at AF-KLM group's financial data.
Also, why KLM was never able to make any allainces in Europe: British Airways, Air Littoral, Alitalia and other ones that I do not remember. Oh, I know, this is because of the others, nothing to do with the Dutch culture!

[ATC Watcher]

Being French myself but having worked in Holland for over 30 years, I can I believe understand both cultures. The Dutch should forget for a moment their natural sense of knowing everything better and perhaps look at what happened in the last decades to airlines in countries of similar size : Sabena, Swisair, Malev etc.. all gone. Without a successful merger they probably also be gone today. What the French should also put their natural senses of being a superior power ( a bit like the Brits :E) and stop treating the Dutch and KLM as inferiors . Without the KLM merger AF would also not be what it is today. The traditional AF milk cows of monopolies in both domestic and Outre-mer routes is no longer there. And the synergy of using 2 hubs SPL and CDG brings money to both airlines.
Today a Canadian , coming from outside Europe, wants to reshuffle the cards and probably is not bothered by national prides and only looks at both airlines as just departments of a larger company.. I cannot say this is a bad thing. per se. Egos bruised , oh yes, but is this the most important ?.

[sekmeth]

Good point! But in recent years my company didnt strike. And its not that im against strikes. But it doesnt make sence to strike over a payrise while your company (not the holding) loses money.

[PAXboy]

ATC Watcher nails it. Since the 'merger' took place not a great deal has changed and all the usual advantages of a merger have not been realised. When merging, the best is to action FAST. Push the two together and do the horrible job of making redundancies and cuts - THEN build something new and, hopefully, improved. If they do not change they will get taken over, however, SkyTeam cannot let them fail. Many fireworks before this is settled.

Countless large mergers fail because the two cultures will not merge or were not compatible in the first place. Daimler Chrysler for example threw away some $29 BILLION. The whole article (and others related to this huge waste of money) should be read by all at the top tables in KLM/AF (of course there is the problem - there should only be one top table): Harvard Business Review (https://hbr.org/2007/05/why-the-daimlerchrysler-merger)
That Daimler can sell Chrysler as a more-or-less intact unit to a private equity firm tells you all you need to know about why the combination failed. The two organizations never were integrated into anything that approached a cohesive whole. The potential synergies that were used to justify the deal went unrealized.

Why did this happen? Because the two organizations really didn’t like each other, and couldn’t cooperate to the extent necessary to make the combination work. Serious efforts to integrate the operations of Daimler and Chrysler foundered on lack of trust clashes between the mid-market cowboys of Detroit and the high-end knights of Stuttgart.

The seeds of post-merger disintegration were sown early when it became obvious that a “merger of equals” was actually a takeover of Chrysler by Daimler. And there were unbridgeable differences in the cultures of the two organizations. As is too often the case in acquisitions, the synergies were all on the surface.

[ZBMAN]

Good point! But in recent years my company didnt strike. And its not that im against strikes. But it doesnt make sence to strike over a payrise while your company (not the holding) loses money.

i think you’ll find the strikes over wages were at a time when AF was actually making money. Both companies are profitable however the Dutch side enjoys a more business friendly environment.

A previous poster implied that only the Dutch side made efforts during the recession. Completely false - in fact it is quite the opposite. 10000 job losses in AF and near zero growth for many years (While KLM grew significantly)

The comments about the French being lazy etc are I must say unhelpful... cheap shots that lead nowhere imho.

[pax2908]

IMO the #1 problem is not about "cultural differences"', but is a problem between the two persons. One of them seems to forever be the symbol of "AF and KL can never work closer together". I don't think AFKL can afford this situation. Elbers seems to have ended up in a very difficult spot. IMO at this point it does not matter how competent he is.

[Asturias56]

In my (non-airline) experience cross-cultural company marriages always underestimate the tribal loyalties (its bad enough when two companies in the same country merge TBH)

If everyone goes around still carrying a French or Netherlands flag tattooed on their metaphorical foreheads you'll get nowhere. You have to see it as an opportunity - and the best way is to mix up the workforce as fast as possible IMHO

Not very easy in rigid airline staffing structures

[Andy_S]

.....the best way is to mix up the workforce as fast as possible IMHO. Not very easy in rigid airline staffing structures

I guess that in those circumstances English would need to be the common language. I suspect that one part of the company would find that unacceptable.

[fab777]

I guess that in those circumstances English would need to be the common language. I suspect that one part of the company would find that unacceptable.

which one?

just curious...

[Sailvi767]

Do you really have to ask? Hint, which country has their controllers speak in two different languages!

[FlightDetent]

As a group, the ATCOs in France wish for English RT in their airspace exactly the same as the visitors do.

[ATC Watcher]

I guess that in those circumstances English would need to be the common language. I suspect that one part of the company would find that unacceptable.
Not really, You are talking about the administrative language or the operational language ? Indeed for many countries, the administrative must be in the language where the airline is located by law . France and Spain for instance still have this rule. Not sure for the Netherlands , but last time I looked ( many moons ago I must admit). the KLM administrative papers were in Dutch... The Lufthansa admin is only in German by the way..
But making the operational language English poses no major problem anymore I would say especially since the pure domestic pilots are long gone and language proficiency tests are now mandatory..
Anyway , first there are ways around it , and secondly rules can always be changed... This is why I look at the Canadian ideas with some interest.. ( and by the way , in Canada they also use 2 languages on the frequency .. .:E )

[Not James Bond]

Well, can't be too bothered about all this. The way that KLM is being treated now by AF is exactly the
same as KLM treated Martinair in the past. A good running carrier being completely plundered by
its parent company. Sounds familiar? Crying foul about this kind of practices by KLM employees is
hypocritical. The French just copied KLM's behaviour. Transavia is another victim by the way.

A small note about KLM's finances: its standalone revenue would never be as high without Air France's
booking system and network. Stand-alone they would be very small indeed.

[Andy_S]

Very fair comment ATC Watcher, as ever.

I was thinking of the operational language, but at every level of the company. This in response to the suggestion that to truly be a merged company, AF/KL should mix up the workforce. Maybe I'm being unfair, but the French government still have influence within Air France, and I imagine there would be some resistance to English being the operational language within a company seen as a French national champion?

[fab777]

Do you really have to ask? Hint, which country has their controllers speak in two different languages!

Canada maybe?

[India Four Two]

This is why I look at the Canadian ideas with some interest.. ( and by the way , in Canada they also use 2 languages on the frequency .. .https://www.pprune.org/images/smilies/evil.gif )

True, but only in Quebec.

[ATC Watcher]

Long articles in both le Monde and Figaro newspapers yesterday , looks like Ben has got all what he wanted . in exchange for renewing KLM CEO, he got effective control of KLM by creating a CEO governance that include KLM CEO and AF CEO, the group Financial Director and Ben as chairman. So the articles say Ben gets control over operations, routes, fleet acquisition and strategy for BOTH airlines.
As a (unrelated) bonus he signed a agreement with AF SNPL for a 4% increase ( they wanted 10) and some guarantee for the future of AF , effectively ending all SNPL industrial actions.
Not bad for an outsider ...

[Long Haul]

Long articles in both le Monde and Figaro newspapers yesterday , looks like Ben has got all what he wanted . in exchange for renewing KLM CEO, he got effective control of KLM by creating a CEO governance that include KLM CEO and AF CEO, the group Financial Director and Ben as chairman. So the articles say Ben gets control over operations, routes, fleet acquisition and strategy for BOTH airlines.
As a (unrelated) bonus he signed a agreement with AF SNPL for a 4% increase ( they wanted 10) and some guarantee for the future of AF , effectively ending all SNPL industrial actions.
Not bad for an outsider ...

I think that the job of CEO must be made a lot easier when your company just reported an yearly operating profit of €1,300,000,000

[fox niner]

The Netherlands government has just announced that they have acquired a 12,68% stake in AFKL. This stake will further increase to 14%, so that it will be as large as the French govt stake in the company.
The reason for this acquisition is apparently that the dutch interests in AFKL were not guaranteed, and to change this the shares were bought during last week.

[Aso]

Love it! Didn't see that one coming.. Fighting fire with fire :E

[pax2908]

It seems the Dutch acted, actually not for best AFKL interest, perhaps they thought in favour of KLM "alone", and it seems without much consideration for what happens in the long term. Another possibility, as somebody else said, is that this was briefed and "agreed on" with the French - at the moment I think this is unlikely.

[Phil Stunell]

BBC says:-
"France has reacted frostily to the Dutch government's sudden purchase of a 12.7% stake in Air France-KLM in attempt to counter French influence.

Shares in the airline company fell almost 11% after the Netherlands government said late on Tuesday it was acting to protect "Dutch interests".

The Dutch aim to match France's 14.3% stake in the airline.

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

According to French reports, the government in Paris was informed of the Dutch move only an hour before a press conference on Tuesday night, and after the shares had been bought.

A ministry source told AFP news agency the Dutch move was both "surprising" and "unfriendly", more in the manner of market traders than a state shareholder.

Meanwhile, French President Emmanuel Macron said the Dutch government should "clarify its intentions".What the Dutch say"Buying this stake ensures we have a seat at the table," Dutch Finance Minister Wopke Hoekstra said of the move, which cost about €680m (£583m; $774m).

The justification, he said, was to protect Dutch economic interests and jobs - particularly regarding Amsterdam's Schiphol airport. Schiphol is Europe's third busiest airport after London Heathrow and Paris Charles de Gaulle."

[ATC Watcher]

this was briefed and "agreed on" with the French - at the moment I think this is unlikely.
It was definitively not agreed , French President Macron talked this evening about an hostile move while the Economy minister Le Maire talks about an unfriendly attack. which took everyone by surprise.
Anyway more State involvement is exactly what the new AF/KL CEO wanted to move away from in France , and now that the Dutch State jumped in , this is unlikely to happen . Result the AF share lost 11% today. Bravo !

[the_stranger]

It was definitively not agreed , French President Macron talked this evening about an hostile move while the Economy minister Le Maire talks about an unfriendly attack. which took everyone by surprise.
Anyway more State involvement is exactly what the new AF/KL CEO wanted to move away from in France , and now that the Dutch State jumped in , this is unlikely to happen . Or the Dutch government realised after their meeting with Smith and the turmoil around the reappointment of Elbers that the French state still had a very large influence in the company, regardless of what Smith wants.
And with the French state not reducing their stake, the only option was to buy, if the Dutch wanted to, at least, neutralise the French influence.

Result the AF share lost 11% today. Bravo !It only lost what it had gained in the previous 5 days, most likely a correction and nothing significantly more.

[fox niner]

The french state was asked time and again during the last 15 years, to get rid of their stake in the company.
They didn’t.
So the dutch govt decided to also aqcuire 14%. (They actually announced that they had reached this percentage today)
There is more at play here. AF was not listening to the sentiments over here in NL.
And also underperforming.

[ATC Watcher]

Let me put it another way : you have a couple forced to marry by their parents , one is not happy because he works more and earn more , and the whole money goes into a joint account . The unhappy one goes to his own parents and convince them to secretly buy part of the house to they live in to put pressure on the other spouse. . Now everybody do not trust one another and this is supposed to help the marriage ?
I am not sure the KLM staff remembers that AF was close to collapsing a few years back , AF447 did not help. . Any airline can go down nowadays, and KLM staff should realise that if AF goes down , they will likely go down too. Nationalism is not the answer anymore. Helping AF gets to the level of KLM is the answer, Not nationalism . The Dutch may think they have made a great coup yesterday , but knowing the French mentality, this will be counterproductive .
Sad day in fact.

[wingview]

If it was the other way around people in France would cheer the goverment, they would go on the street to celebrate. The French goverment has a lot of power within the AFKL Group and in Holland KLM is too big to become Sabena 2. 300000 households are living from Schiphol and the Dutch goverment showed it's theeth. It's just protection of the Dutch market. The French have invented this. When everything is at ease again it's likely these shares will be sold again and hopefully the French gov will too.
KLM should never merged with AF anyway, this was waiting to happen. The biggest surprise is that a Canadian triggert this... He's the fool who gives pilots a 7% increase on their paycheck within no time while at KLM it was cut by Elbers and with more hours working for the Dutchies. This is no way to run a business profitable by Smith and try to steal departments from KLM. The best thing for KLM is to look for a different partner something they should have done long ago. Air France won't be Swissair 2 because the French goverment will put in money and don't care if that's allowed or not. That's the only way Air France will survive without KLM.

[fab777]

I heard that KLM pilots had a pay raise of their own last year... (actually less work for the same pay, which boils down to the same result : lower productivity). So no need to be jealous of your french colleagues.

[Scuderia46]

I heard that KLM pilots had a pay raise of their own last year... (actually less work for the same pay, which boils down to the same result : lower productivity). So no need to be jealous of your french colleagues.

Better check your sources next time then cause you're wrong

[pax2908]

I hazard a guess that Elbers "refused" (allegedly) to become AFKL CEO last year, not because he did not want, but perhaps he was not yet fully ready at the time. In other words the most recent event (the Dutch gov't buying shares of AFKL) would have been in preparation for quite some time ... order of 1 year perhaps?

[ZBMAN]

Better check your sources next time then cause you're wrong

On this instance it is YOU scuderia who should check your sources because YOU are wrong.

[the_stranger]

I heard that KLM pilots had a pay raise of their own last year... (actually less work for the same pay, which boils down to the same result : lower productivity). So no need to be jealous of your french colleagues.
Everybody in KLM has had a pay rise, this month a rise of 1%.

[Aso]

I hazard a guess that Elbers "refused" (allegedly) to become AFKL CEO last year, not because he did not want, but perhaps he was not yet fully ready at the time.

Nope: he said he would accept if they would keep the same two CEO set up with Leo van Wijk and the then AF CEO. This worked well but also kept enough distance between the companies. It has been KLM's fear for years that there will be a full integration and that the french part of the company will burn all the KLM reserves and profits...

[astonmartin]

The Netherlands are slowly taking over the role the UK used to have in the EU: Being the leader of countries that resist the German-French axis of power and try to prevent too much money flowing from North to South.

This is a statement to Paris.

[ATC Watcher]

The Netherlands are slowly taking over the role the UK used to have in the EU: This is a statement to Paris.
You mean the Dutch are going to leave the EU in the end ? :E

PS : Seen your pseudo here I could not resist the smile of the analogy with the real Aston Martin share price that went down 21% today. Sorry for you , really . Price for leaving the EU perhaps . Nationalism again ..

[fox niner]

I hazard a guess that Elbers "refused" (allegedly) to become AFKL CEO last year, not because he did not want, but perhaps he was not yet fully ready at the time. In other words the most recent event (the Dutch gov't buying shares of AFKL) would have been in preparation for quite some time ... order of 1 year perhaps?

What I read in the media was that the dutch govt started to prepare this audacious move in 2017. After Delta and China Eastern acquired 8.76% and the dutch government was NOT consulted, they realised that the connectivity of the Netherlands was at stake. The open economy and global orientation of NL requires a global airline and mainport; Schiphol and KLM.
AF was not willing/able/forthcoming to give necessary guarantees to that effect.
So back then, starting in 2017, the dutch govt devised a road map to defend the economic stakes.
This has nothing to do with profit or share holder value. This is about economic vitality and survival in the world economy.
The NL govt consulted frequently whether the French shares could be sold.
Apparently not.
This is the result: some sort of economic warfare, in which Ben Smith did not think he would end up into.

[dirk85]

Can't believe there were so many shares floating on the open market and that they could be bought without skyrocketing the price, so the question is, who sold those shares to the Dutch government?

[Aso]

Can't believe there were so many shares floating on the open market and that they could be bought without skyrocketing the price, so the question is, who sold those shares to the Dutch government?

There are always shares floating and available if the price is right. Investing parties (unlike strategic investors) make their shares available if they (or their computer algorithm they use!) feel that the price offered is better than what it is worth. This was clearly shown by the share price increase needed to make them available to the market and the immediate fall in the price when the story came out. :)

[Bidule]

The best thing for KLM is to look for a different partner something they should have done long ago. .

As already said, KLM tried many opportunities in the past; however, it never worked. So, the reason is likely on the Dutch side as the considered opportunities were not all French or in the same country....
Just as a reminder, KLM and the Dutch Government were very happy when Air France accepted to buy KLM some years ago; if not, KLM would not be here anymore.

[ATC Watcher]

As already said, KLM tried many opportunities in the past; however, it never worked. So, the reason is likely on the Dutch side as the considered opportunities were not all French or in the same country....
Just as a reminder, KLM and the Dutch Government were very happy when Air France accepted to buy KLM some years ago; if not, KLM would not be here anymore.
Very true, I remember the discussions back then and why it failed with BA, the "preferred" partner.
Anyway I hear this morning that both French and Dutch Finance ministers are going to have a face to face meeting today to clarify a the situation. Hopefully hey will succeed and Ben Smith will stay ..

[procede]

The dutch government buying a stake is mostly to do with the development of the KLM route network. The fear is that due to political pressure additional hub traffic (new destinations and increased frequencies) will be concentrated through CDG instead of AMS. For OD traffic from AMS these routes (which aren't viable without hub traffic) are an important part of making the Netherlands attractive for international companies. This is also why the moving of fleet planning and route development to France is such a sensitive issue.

[astonmartin]

Can't believe there were so many shares floating on the open market and that they could be bought without skyrocketing the price, so the question is, who sold those shares to the Dutch government?

Capital Group

28 million shares for €13,355 per share. 84 cents more then the market value at the time. An offer the Americans could not refuse: They bought them for around €9, a year earlier.