When the Dutch authorities upped their stake in Air France-KLM in February 2019, the decision raised many eyebrows. It was not only surprising but also unlawful, as a Dutch courts’ ruling now shows. 

The Court of Audits of the Netherlands estimated that the Dutch government had broken the law by deciding to increase its participation to 14% of Air France-KLM capital for a value of €744 million in February 2019.

The decision of the Dutch authorities had taken everyone by surprise, including the board of the airline group and the French government (which owns 14,30 % of the capital). At the time, French Finance Minister, Bruno Le Maire, qualified the move as “very surprising and unfriendly”, while Air France-KLM’s board shared its concerns that it could “affect the new dynamics of the Group and its companies” driven by then-newly appointed Air France-KLM CEO, Benjamin Smith.

"The goal is ultimately to obtain a position equivalent to that of the French state," explained Dutch Finance Minister Wopke Hoekstra during a press conference, adding “acquiring this participation gives us a seat at the table.” This sudden decision followed tensions between the group and the Dutch airline over the future of KLM CEO Pieter Elbers, whose contract had to be renewed. He was eventually named deputy general manager of the group.

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In an unexpected move, the Netherlands acquired 12.68% of Air France-KLM capital on February 26, 2019, for a total of €680 million euros.
 

On March 20, 2020,  the Court of Audits of the Netherlands judged that the ambitious move was in fact unlawful. The Minister failed to consult with the two chambers of Parliament as he was obliged to do so for such an important investment. During meetings kept secret, Hoekstra had only informed the leaders of each chamber, who were obliged not to reveal the information to the different political groups. Hoekstra justified himself by claiming that the information could have raised the group's share price, making the entry into the capital of Air France-KLM more expensive.

The ruling of the Court does not cancel the operation, as it was approved by the Chamber of Deputies once the deed was done. It could, however, rekindle the tensions between the French and the Dutch airlines, already exacerbated by the financial crisis.

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Air France-KLM reported a net loss of €1.8 billion in the first quarter. Ben Smith, the CEO of the Franco-Dutch airline group, will begin discussions with French unions on staff cuts. The financial crisis rekindled tensions between employees of the two airlines.