Air France-KLM's Dutch Arm Goes to Battle Over Elbers's Fate

(Bloomberg) -- Long simmering tension within Air France-KLM erupted into the open after managers at Dutch arm KLM warned of possible strikes and employee unrest should Pieter Elbers be removed as head of the unit.

“The possibility of an unexplainable, involuntary departure of our CEO brings a lot of tension in the workforce,” a group of managers wrote in a Feb. 8 letter seen by Bloomberg News to the Air France-KLM board. The move “will certainly lead to social unrest and possible industrial actions.”

The KLM managers asked the carrier’s directors to renew Elbers’s mandate at their next meeting on February 19. A spokeswoman for Air France-KLM declined to comment. Dutch press agency ANP first reported on the letter.

The Dutch offensive is the latest challenge facing Air France-KLM Chief Executive Officer Ben Smith, who took the helm of the troubled airline in September following a series of crippling strikes at the French arm. The parent company is considering 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.

Takes Aim

The letter takes direct aim at the leadership of Smith, who has reached agreements with unions in France, and has made clear the need to bring Air France’s profit margins to a similar level as at KLM. He is seeking to join the supervisory board of KLM.
Read Air France-KLM Said to Weigh Changing Dutch Head for New Era (1)

The unfolding spat has also taken on a political tone. Dutch Finance Minister Wopke Hoekstra will seek to discuss Elbers’s position at KLM during a meeting Monday in Brussels with his French counterpart, Bruno Le Maire, according to a spokesperson for the Dutch government. The French government owns a 14 percent stake in Air France-KLM and has representatives on the carrier’s board who would have received the letter.

“Existing competences and relevant KLM experience do not seem to be valued in decision-making,” the KLM managers wrote. “The lack of a clear strategy for Air France-KLM and the roles of the airlines within the group make it impossible to understand how the unilateral decisions of the new Air France-KLM CEO contribute to the necessary improvement” of the group.

“This style of leadership and lack of involvement, discussions and consultation is even more difficult to understand since we have been successful in transforming KLM,” the letter said. “Let’s not weaken the KLM team because it will definitely hurt” Air France-KLM, which is losing ground compared to other European airline groups, it said.

Deutsche Lufthansa AG overtook Air France-KLM last year to become Europe’s biggest airline, grabbing the top spot held by the Paris-based company since the merger of the French and Dutch flag-carriers.

Air France-KLM shares rose 0.7 percent to 10.30 euros at 2:00 p.m. in Paris, bringing gains since the start of the year to almost 9 percent.

--With assistance from Ellen Proper.

To contact the reporter on this story: Ania Nussbaum in Paris at anussbaum5@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, John Bowker

©2019 Bloomberg L.P.