AccorHotels is considering taking a minority stake in the troubled airline Air France KLM. The hope is to better compete with the wider-ranging travel packages offered by their rivals such as Expedia and Booking.com.
The company is Europe’s largest hotel group in the number of rooms continent-wide. AccorHotels recently issued a statement mentioning its thought to move after Les Echos, France’s newspaper, stated the group might buy some or perhaps all of France’s 14.3 percent stake in Air France KLM
Air France KLM shares were up around 7 percent during late-session trading. Meanwhile, investors bet a sale of Paris’s stake could help push the airline through painful reforms. For the state, these reforms are politically difficult to support.
Shares in the AccorHotels, however, fell about 6 percent. Some Analysts questioned the logic behind a stake purchase.
Is The Best Way for AccorHotels to Help Air France KLM through Shares? Analysts Think Not
Caius Slater, a Bernstein analyst, stated that it was curious as to why a commercial partnership can’t achieve their goal. They don’t believe an equity stake is necessary.
If they chose a partnership, they would be able to make a joint rewards program for the 15 million Flying Blue members of Air France and AccorHotels’ 41 million reward customers. This combination would help AccorHotels create a one-stop-shop for travelers who currently use online rivals to AccorHotels.
In the past, AccorHotels has held talks with Air France KLM about the development of joint projects. These talks also included the potential of buying the minority stakes in the airline.
Meanwhile, there is no guarantee the initiatives will lead to an agreement or form of implementation. It is uncertain who could potentially purchase a minority stake.
Air France KLM came into being in 2004 after the merger of Air France and Dutch carrier KLM. The company is now in turmoil after the departure of their CEO Jean-Marc Janaillac due to French staff rejecting a pay deal and starting a series of strikes that ended up costly to the company.
During the annual International Air Transport Association in Sydney, the KLM Chief Executive declined to comment on the report of Les Echos. However, he did say the company needs to be restructured with new interventions and that the changes are still in progress.
Air France KLM is struggling in its attempt to push through cost-cutting and labor reforms that their rivals have implemented to meet the challenge of low-cost competitors like Ryanair and EasyJet. So far, Air France KLM shares have dropped 45 percent this year.