Air France-KLM Stake Takes State Intervention to a New Level

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The Dutch rarely feature in discussions about state intervention.

Yet the Netherlands has been steadily inserting itself into business, with the 744 million-euro ($848 million) purchase of a 14 percent stake in Air France-KLM Group this week taking its dirigisme to a new level. The government cited the loss of influence over a key sector -- airlines and airports -- as the reason for its action. Even for people studying the Dutch state’s subtle meddling in business, the Air France-KLM purchase might be a step too far.

“What the government is doing is unclear to me,” said Jaap de Wit, director at Pintail Aviation Economics and professor emeritus at the University of Amsterdam. “They should shed more light on why they’re throwing this amount of money on it. Arm wrestling is never the best method to get things done.”

With the purchase, the Dutch join a trend of state intervention in the corporate world, with global governments citing the national interest for their actions. For the Dutch government, which has mostly acted behind the scenes to protect businesses -- seeking to block billionaire Carlos Slim’s efforts to take over telecom company Royal KPN NV and U.S. rival PPG Industries Inc.’s efforts to purchase paint maker Akzo Nobel NV-- the Air France-KLM stake purchase marks a new, more visible, long-term role for the state.

“That this is exceptional is undisputed,” said Dirk Gerritsen, assistant professor of financial markets at Utrecht University School of Economics. “The question is whether this is a one-time event or policy.”

Long-Term Commitment

Announcing the purchase of the stake on Tuesday night, Dutch Finance Minister Wopke Hoekstra said: “There was simply too little influence from the state in KLM to be able to look after the Dutch public interest well, and to make a success of KLM. This step shows our long-term commitment to the entire company.”

While the Dutch government has poured money into some of the country’s largest financial institutions in the past, it was mainly to prevent their collapse after the financial crisis 10 years ago. It was also with a clear message that the measure would be a temporary one.

In 2008, the government took over ABN Amro Group NV, once one of the world’s biggest banks, only to take it public again in 2015. The state steadily sold down its stake and now holds 56 percent of the lender. Insurer ASR Nederland NV, which was nationalized in 2008, was brought back to the market in 2016. The state’s most recent financial industry rescue was SNS Reeal in 2013. The re-branded insurance part, Vivat, was sold to Chinese Anbang Insurance Group Co. in 2015 while its lender unit Volksbank is still 100 percent state-owned.

Protective State

Signs of a more protected attitude among Dutch politicians toward its businesses emerged as takeover attempts of Unilever and Akzo Nobel in 2017 triggered a public debate, with politicians verbally opposing those deals. That led to proposed legislation to add in timeouts in cases of hostile takeovers, stressing the importance of Dutch companies to the local economy. Separately, billionaire Carlos Slim’s America Movil SAB takeover attempt of KPN in 2013 pushed the Dutch to work on a law that allows it to block telecom takeovers.

For much of the rest, government efforts have been to largely focused on divesting its stakes in business, including the privatization of telecom company KPN and mail company PostNL -- all the more reason why the Air France-KLM action came as a surprise.

The purchase infuriated France -- the capital of dirigisme in Europe -- with a French government official accusing the Netherlands of acting like a corporate raider. For some in the Netherlands, the government’s action is just as incomprehensible.

“Policy choices were made in the past, and the current move seems to be at odds with that,” said De Wit.

To contact the reporters on this story: Ellen Proper in Amsterdam at eproper@bloomberg.net;Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Vidya Root, Joost Akkermans

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