Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Air France-KLM agrees cargo deal with French shipping firm CMA CGM

Published 18/05/2022, 08:15
Updated 18/05/2022, 11:11
© Reuters. FILE PHOTO: The logo of airline company Air France is seen inside the Terminal 2 at Paris Charles de Gaulle airport in Roissy-en-France near Paris, France, December 2, 2021.  REUTERS/Sarah Meyssonnier

© Reuters. FILE PHOTO: The logo of airline company Air France is seen inside the Terminal 2 at Paris Charles de Gaulle airport in Roissy-en-France near Paris, France, December 2, 2021. REUTERS/Sarah Meyssonnier

By Tim Hepher and Gus Trompiz

PARIS (Reuters) -French shipping firm CMA CGM will take a stake in Air France-KLM as part of an air cargo partnership, betting on growing demand for flying goods around the world as supply chains remain snarled in the wake of the pandemic.

CMA CGM will take up to 9% of Air France-KLM, worth about 240 million euros ($252 million) based on Tuesday's closing price, part of a possible capital increase by the airline group for the duration of their partnership that is initially set to run for 10 years, the two companies said.

It will make CMA CGM the fourth biggest shareholder, according to Refinitiv data, and mirrors a similar initiative planned by shipping company MSC, which has teamed up with Germany's Lufthansa on a potential bid for Italian airline ITA Airways.

Air France-KLM shares rose 3.5% in early trade, making it a top performer on the Paris SBF-120 equity index.

Marseille-based CMA CGM, one of the world's largest container shipping lines, established an air cargo division last year as part of a push to develop non-maritime logistics.

Surging profits for ocean shipping, linked to high freight rates since the COVID-19 pandemic, have allowed CMA CGM and other shippers to invest in other forms of transport to add resilience to global supply chains and protect against a downturn.

"All ocean container carriers are minting money these years and seek to put them all smartly into pushing their services offerings wider, to include more modal, like air, and to get into full transport," said Peter Sand, chief analyst at the air and ocean freight rate benchmarking platform Xeneta.

He added that customers would benefit from shorter transit times for goods.

CMA CGM, privately controlled by the Saade family, acquired auto transport company Gefco last month that had been co-owned by Russian Railways (RZD) and carmaker Stellantis.

Air France-KLM and CMA CGM said their partnership was expected to generate "significant revenue synergies" and said they had a "strong ambition to invest and grow sustainably" in the air freight market. They will also pool their global sales resources.

As a shareholder, the Dutch state "supports the partnership which is good for the financial position," a Finance Ministry spokesperson said.

ING analysts welcomed the deal, which will help the French carrier capitalise on a part of the business that was not very profitable before the pandemic. Combining forces with CMA gives it "material" market share, they said in a note.

The partnership with Air France-KLM covers a combined fleet of 10 full-freighter aircraft including four at CMA CGM Air Cargo and six at Air France-KLM. Together, they also have 12 aircraft on order.

It also covers Air France-KLM’s belly aircraft capacity, covering freight carried in the airline group's more than 160 long-haul passenger aircraft.

Air France-KLM competes in the cargo market with European carriers including Lufthansa and freight specialist Cargolux, as well as major Gulf and Asian carriers.

The separate networks of Air France, KLM and Martinair - a subsidiary of the group - rank the group around eighth in the global league table of cargo airlines by traffic, according to International Air Transport Association statistics.

Air France-KLM's main shareholders, which include the French and Dutch governments, supported CMA CGM gaining a board seat at the company's next board meeting on May 24, the partners said.

The tie-up is subject to anti-trust approval. The final size of CMA's stake will be determined by the airline's planned capital increase worth up to 4 billion euro.

Some 2 billion tonnes tonnes of global cargo are moved annually in containers by sea, while air freight volumes are around 60-70 million tonnes, Xeneta's Sand said.

"Cargo does shift from time to time, from ocean to air, when conditions are right."

In a recent example of how COVID lockdowns are spurring companies to use air for speedier deliveries, General Electric (NYSE:GE)'s healthcare unit flew dye used for medical scans and tests to help combat U.S. shortages caused by the suspension of its Shanghai factory.

© Reuters. FILE PHOTO: The logo of airline company Air France is seen inside the Terminal 2 at Paris Charles de Gaulle airport in Roissy-en-France near Paris, France, December 2, 2021.  REUTERS/Sarah Meyssonnier

Nestle is also flying baby formula supplies from Europe to restock U.S. supermarket shelves due to a shortage there.

($1 = 0.9510 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.