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KLM airplanes are seen parked at Schiphol Airport in Amsterdam, Netherlands April 2 2020. Picture: REUTERS/PIROSCHKA VAN DE WOUW
KLM airplanes are seen parked at Schiphol Airport in Amsterdam, Netherlands April 2 2020. Picture: REUTERS/PIROSCHKA VAN DE WOUW

Paris — French shipping firm CMA CGM will take a stake in Air France-KLM as part of an air cargo partnership, betting on growing demand for flying goods around the world as supply chains remain snarled in the wake of the pandemic.

CMA CGM will take up to 9% of Air France-KLM, worth about €240m based on Tuesday’s closing price. It is part of a possible capital increase by the airline group for the duration of their partnership, which is initially set to run for 10 years, the two companies said.

It will make CMA CGM the fourth-biggest shareholder, according to Refinitiv data, and mirrors a similar initiative planned by shipping company MSC, which has teamed up with Germany’s Lufthansa on a potential bid for Italian airline ITA Airways.

Air France-KLM shares rose 3.5% in early trade, making it a top performer on the Paris SBF-120 equity index.

Marseille-based CMA CGM, one of the world’s largest container shipping lines, established an air cargo division last year as part of a push to develop non-maritime logistics.

Surging profits for ocean shipping, linked to high freight rates since the Covid-19 pandemic, have allowed CMA CGM and other shippers to invest in other forms of transport to add resilience to global supply chains and protect against a downturn.

In April CMA CGM, privately controlled by the Saade family, acquired auto transport company Gefco, which was co-owned by Russian Railways and carmaker Stellantis.

Air France-KLM and CMA CGM said their partnership is expected to generate “significant revenue synergies” and they have a “strong ambition to invest and grow sustainably” in the air freight market. They will also pool their global sales resources.

ING analysts welcomed the deal, which will help the French carrier capitalise on a part of the business that was not very profitable before the pandemic. Combining forces with CMA gives it “material” market share, they said in a note.

The partnership with Air France-KLM covers a combined fleet of 10 full-freighter aircraft, including four at CMA CGM Air Cargo and six at Air France-KLM. Together, they also have 12 aircraft on order. It also covers Air France-KLM’s belly aircraft capacity, covering freight carried in the airline group’s more than 160 long-haul passenger aircraft.

Air France-KLM competes in the cargo market with European carriers including Lufthansa and freight specialist Cargolux, as well as major Gulf and Asian carriers.

The separate networks of Air France, KLM and Martinair — a subsidiary of the group — rank the group about eighth in the global league table of cargo airlines by traffic, according to International Air Transport Association statistics.

Air France-KLM’s main shareholders, which include the French and Dutch governments, support CMA CGM gaining a board seat at the company’s next board meeting on May 24, the partners said.

The tie-up is subject to antitrust approval. The final size of CMA’s stake will be determined by the airline’s planned capital increase worth up to €4bn.

In a recent example of how Covid lockdowns are spurring companies to use air for speedier deliveries, General Electric’s healthcare unit flew dye used for medical scans and tests to help combat US shortages caused by the suspension of its Shanghai factory.

Nestlé is also flying baby formula supplies from Europe to restock US supermarket shelves due to a shortage there.

Reuters

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