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FDX: DOWNGRADEZIM: BEST PERFORMER WTC: INVESTOR DAY AAPL: LEGAL RISKTSLA: UPGRADEXOM: DIVESTMENT TALKAMZN: HOT PROPERTYGM: ASSET SALEHLAG: PROTECTING PROFITSVW: STRIKINGPLD: FAIR VALUE RISKSTLA: CEO OUTDHL: BOLT-ON DEALMAERSK: NEW ORDERGXO: POLISH DEAL EXTENSIONDSV: TRIMMING
FDX: DOWNGRADEZIM: BEST PERFORMER WTC: INVESTOR DAY AAPL: LEGAL RISKTSLA: UPGRADEXOM: DIVESTMENT TALKAMZN: HOT PROPERTYGM: ASSET SALEHLAG: PROTECTING PROFITSVW: STRIKINGPLD: FAIR VALUE RISKSTLA: CEO OUTDHL: BOLT-ON DEALMAERSK: NEW ORDERGXO: POLISH DEAL EXTENSIONDSV: TRIMMING
Shipping line vertical consolidation took a further step today as cash-rich CMA CGM bought a stake in Air France-KLM and announced they will merge freighter fleets.
The owner of Ceva Logistics and now Gefco made $17.8bn in profit in 2021, and is further strengthening its foothold in the French logistics market with the investment, while gaining an experienced partner to take care of its freighter aspirations.
AF-KLM and CMA CGM have signed a 10-year, exclusive partnership to combine their cargo networks and freight capacity.
Their fleet will consist of 10 freighters, with another 12 on order.
Of those, CMA CGM currently owns four A330-200Fs, operated by Air Belgium while the line applies for its AOC. It also has eight aircraft on order, with a 777F due to arrive shortly, another a little later and four A350Fs due to deliver from 2025. AF-KLM has six freighters, with orders for four more.
CMA, which currently operates from Liege Airport, said AF-KLM may operate two of its new aircraft.
Interestingly, the deal also includes AF-KLM’s belly capacity, revealing a full merger strategy. The pair said the partnership would “leverage both partners’ respective global sales teams, presenting one voice to the customer”.
And it would “generate significant revenue synergies”, they added, including “the joint design of the full freighter networks and enhanced products and services mix opportunities”.
It acknowledged that the shipping line would leverage “Air France-KLM’s vast franchise, experience and capabilities in air freight, backed by a global cargo network.
“CMA CGM will mobilise its large commercial network and global logistics platform and will complete this offer with innovative logistics and multimodal solutions, particularly in sea and land transport.”
With money burning a hole in CMA CGM’s pocket – AF-KLM made a net loss in 2021 of €3.29bn ($3.46bn), although cargo revenues were €3.5bn – the line is becoming a reference shareholder of AF-KLM Group and will take up to 9% of AF-KLM’s ex-post share capital during the period of the partnership.
The pair said the investment “could be made as part of the contemplated capital increase of AF-KLM”, announced in February. AF-KLM shareholders will approve the appointment of a CMA CGM board member next week, subject to the line’s investment.
Rodolphe Saadé, chairman and CEO of Marseilles-based CMA CGM Group, said the partnership “allows us to significantly accelerate the development of our air division, CMA CGM Air Cargo, which was created just over a year ago, and to position our two companies among the world’s leading players in air freight.”
CMA CGM Air Cargo had come under scrutiny from airfreight executives who had questioned some strategic decisions that, one said, indicated lack of experience. This tie-up will boost CMA’s credentials – and ensure a steady line of business for AF-KLM.
Observers will ask, however, whether the Dutch element of the partnership, which has long struggled with strategic divergence from its French counterpart, will enjoy further French influence. Pieter Elbers, president and CEO of KLM, has decided to leave his post earlier than expected, and today it was announced he will join India’s Indigo as CEO by October 1. KLM said in January that Mr Elbers would not start a third term in the role as of May 1 2023. “This enables the Supervisory Board to start a thorough process for a successor in a timely manner,” it said. Any successor will now need to take the new French partnership into consideration.
The move could also put pressure on Lufthansa and MSC to complete a deal for new Italian airline ITA, which the pair are currently examining.
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