CMA CGM, the French shipping group, is set to become a leading shareholder in Air France-KLM and will forge a partnership in air cargo with the carrier, part of a drive to expand its reach after a boom in its business during the pandemic.
The Marseille-based container company, which in recent months has made investments in logistics ventures, port terminals and a parcel delivery group at a time when international shipping prices have been soaring, will take up to 9 per cent of the airline group, the companies said.
The deal will make CMA CGM a top investor in Air France-KLM, which is partly backed by the French and Dutch governments, as the airline emerges from a rocky patch following coronavirus lockdowns that brought most travel to a halt and pushed the company to request bailouts.
The shipping group’s position as a shareholder will depend on the outcome of a looming €4bn capital raising at Air France-KLM, and on whether state investors or shareholders such Delta Air Lines of the US and China Eastern Airlines take part.
A partnership would also set a precedent in the cargo world in which players, including some of CMA CGM’s shipping rivals, have begun to encroach on the airfreight market.
“We think we can be innovators. The existing air-cargo market has not been very innovative for the last 30 to 40 years. The model has been quite stagnant,” Ben Smith, Air France-KLM chief, said in an interview.
The 10-year agreement, which will allow the companies to pool their networks and cross-sell their freight capacity, will help bump up revenues and offer broader services to existing clients, many of which are shared with CMA CGM, Smith added.
Unlisted CMA CGM, the world’s third-biggest container group after MSC of Italy and Denmark’s Maersk, broke into air cargo last year by purchasing four aeroplanes.
It was encouraged by demand from customers asking for “a more express service”, CMA CGM chief Rodolphe Saadé told the Financial Times. Those cargo planes will add to Air France-KLM’s six freight carriers, and the two companies have another combined 12 on order.
The companies expect to capitalise on a strong recovery in airfreight traffic since the height of pandemic lockdowns in 2020, despite Covid-19 variants persisting.
Although CMA CGM initially also requested a French state-backed loan in 2020, which it has since repaid, the company has emerged as one of the big winners globally. It had previously struggled with losses and a large debt load.
Demand for shipping transportation has soared and supply-chain logjams have driven up prices. CMA CGM’s improving finances had pushed it to speed up a plan to transform itself into a broader logistics company, Saadé said.
He added that as an Air France KLM shareholder — the group should receive one board seat — CMA CGM wanted to see the carrier do more deals and pounce on acquisitions.
“In our industry, we are a consolidator and we would very much like, when the timing allows for it, for Air France-KLM to also seize opportunities in the market to grow,” Saadé said.
Smith declined to comment on when the capital raising would take place. Air France-KLM has been looking to do it as soon as possible, partly to repay state aid which is preventing it from acquiring more than 10 per cent of another company under EU rules.
In another example of airline and shipping companies teaming up, CMA CGM’s German rival Lufthansa is working with MSC to bid for Italy’s ITA Airways, the state-owned successor to Alitalia, which Air France-KLM is also interested in, Smith confirmed.
