Air France-KLM Starts Search to Replace Head of Dutch Arm

(Bloomberg) -- Air France-KLM has begun a search to replace the head of its Dutch arm in a move that could give Chief Executive Officer Ben Smith a fresh start in improving relations between its two flag carriers. 

Shares of the airline group fell as much as 1.8% in Paris on Friday, a day after the group said Pieter Elbers “will not enter into a third term as CEO and president of KLM.”

Elbers has had a tenuous hold on the job for some time due to his at-times troubled relations with Smith, who has sought to carry out reforms that would make the French and Dutch sides of the group cooperate more effectively. The KLM chief survived a showdown two years ago only after Smith was handed greater governance powers.

A spokesman for Air France-KLM declined to comment beyond the statement. 

While the group said the supervisory board of KLM would start a “thorough process for a successor in a timely manner,” it’s not clear whether Elbers will finish his term, which ends on May 1, 2023. 

In a separate statement from KLM, the executive said he’s “handing over the baton” after three decades at the carrier. 

French Sway

Air France-KLM has survived the pandemic on successive bailouts from both France and the Netherlands, with the French emerging as the biggest shareholder with a 29% stake. The newfound dominance has gone some way in quelling infighting between the two sides.   

The countries and carriers have often been at odds since the 2004 merger of their respective national airlines, with the Dutch arm long resenting French control. Air France also has weaker profitability than KLM and a history of labor conflict.

Board Seat

In February 2020, Smith struck a compromise aimed at easing a growing rift, backing Elbers to remain head of the Dutch arm and securing a vital seat for himself on KLM’s board. 

The trade-off was aimed at ending an open revolt among Dutch staff. Tensions between the carriers had spilled into the streets, leading workers in the Netherlands to demonstrate at their headquarters outside Amsterdam in support of Elbers, who they feared would be ousted by Smith.

Fleet Plans

Smith has since worked to smooth operations, notably by placing decisions about fleet renewal squarely in the hands of the group. A mega-order last month from Airbus SE will result in KLM using aircraft from the European manufacturer. 

The decision against a third term for Elbers followed “close consultation” with the executive, Air France-KLM said in its statement. 

“I am grateful for the spirit in which this process has been held,” Smith said.

©2022 Bloomberg L.P.