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Accor Mulls Buying Stake in Strike-Ridden Air France-KLM

Updated on
  • Les Echos said hotel operator could buy state’s 14.3% holding
  • Air France-KLM shares surge of deal prospect; Accor tumbles

Europe’s biggest hotel operator is considering acquiring a minority stake in Air France-KLM, becoming the anchor investor in the French airline as it struggles to contain a bitter and costly labor dispute.

The prospect of Accor SA, operator of the Raffles, Sofitel, Mercure and Ibis brands, swooping in to buy the French government’s 14.3 percent stake sent shares in Air France-KLM surging as much as 7.4 percent on Monday. Accor stock slumped, with analysts at Sanford C. Bernstein & Co. saying the deal may be risky for the hotel owner based in Issy-les-Moulineaux, France.

“Air France-KLM currently has no CEO, no evident strategy to solve its labor crisis, and is highly exposed to rising fuel prices,” analysts including Richard Clarke said in a note. “While the strategic rationale for Accor is there, we wonder why this cannot be achieved by a commercial partnership.”

A tie-up with Accor would give Air France a commercial partner as its biggest owner, after Les Echos reported that the hotel operator is considering buying the French state’s holding. A sale of the stake would lessen the threat of political meddling in the airline’s operations, while potentially inflaming tensions amid a protracted labor dispute. Fifteen days of walkouts that began on Feb. 22 by pilots, cabin crew and ground staff triggered the resignation of former CEO Jean-Marc Janaillac and cost more than 400 million euros ($467.8 million).

For AccorHotels, an airline partner would help fill rooms across its more than 4,000 hotels in 100 countries. Buying a stake now would follow a 45 percent drop in Air France shares this year, the worst performance in the Stoxx 600 Travel & Leisure index. Few hotel chains have ventured into airline ownership in the past, though airlines have taken stakes in hospitality companies. SAS AB once had a stake in the Radisson brand, for example, and tour operators such as Thomas Cook Group Plc and TUI AG own many of their own hotels.

‘Industrial Growth’

AccorHotels said in a statement late Sunday that a potential acquisition of a minority holding in the airline would “strengthen the industrial growth project.” The company said the firms have in past years discussed joint efforts spanning loyalty programs and a shared services platform. The latest move is at a “very early stage” and will be discussed with the carrier “in due time,” it said.

The statement confirmed a report in the Les Echos newspaper. Should a deal be reached, Accor CEO Sebastien Bazin would become non-executive chairman of the carrier, Le Figaro reported.

The labor conflict at Air France-KLM has reached into the upper echelons of the French government, with ministers warning the dispute threatened the airline’s future. While the interim management team led by finance chief Frederic Gagey has left talks with unions in limbo, the underlying dispute over pay hasn’t been resolved.

Air France-KLM was trading 7.4 percent higher at 7.50 euros at 12:27 p.m. in Paris, putting the value of the government’s 14.3 percent at about 460 million euros. Accor shares tumbled 6.4 percent, the most since June 2016, to 44.53 euros, giving a market value of 12.9 billion euros.

(Adds analyst comment in third paragraph.)
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