AccorHotels Considering Minority Stake In Air France-KLM

We’ve seen quite a few acquisitions the past few years in the travel space, and we’ve also seen some strategic investments. However, typically we see airlines investing in airlines, and hotels investing in hotels. This situation is different.

Reuters is reporting that AccorHotels is considering buying a minority stake in Air France-KLM. AccorHotels has confirmed their interest in a statement, saying that they may buy some or all of the French state’s 14.3% stake in Air France-KLM. This could come in the form of the French government selling some or all of their shares in the company, or even potentially swapping their Air France-KLM shares for some shares in AccorHotels.

Air France-KLM shares are up about 6% following the news, while AccorHotels shares are down about 7%, which I think is pretty reflective of the general sentiment regarding a deal like this.

A closer partnership between AccorHotels & Air France-KLM could make sense

In theory a closer partnership between AccorHotels and Air France-KLM could make sense. Air France-KLM is one of Europe’s mega-airlines, and AccorHotels is Europe’s largest hotel group in terms of the number of hotel rooms offered. The way AccorHotels sees it, they could better compete with the likes of expedia.com and booking.com if they worked directly with an airline to better sell the entire travel “experience.”

Furthermore, both brands have big loyalty programs — Flying Blue has 15 million members and AccorHotels has 41 million members. Presumably they could benefit from working together and leveraging those membership bases.

As we see loyalty programs and travel distribution evolve, maybe the next logical step is to see more cooperation between airlines and hotels. The concept of airline and hotel brands working together is nothing new — we have RewardsPlus between Marriott and United, and Crossover Rewards between Starwood and Delta, for example.

It looks like AccorHotels is hoping for a much closer partnership than that.

But do they have to invest to achieve that?

What I can’t fully wrap my head around is why a minority investment is needed for this. A minority investment as such wouldn’t necessarily mean that the two companies would have to cooperate any more closely. Similarly, if they can work together in a mutually beneficial way, then it seems a closer partnership could make sense without any sort of an investment.

Does AccorHotels actually think Air France-KLM is a good investment? It’s possible. I mean, the airline is a mess due to their never-ending labor issues, and the company’s CEO just recently announced that he’d resign. Air France’s stock is worth about half as much as it was a few months ago, but even at current prices it’s around the same level it has been for much of the past several years. With oil prices rising, it seems like an especially bad time to invest in an airline.

Bottom line

I’ll be curious to see what comes of this. AccorHotels wanting to work more closely with Air France-KLM is nothing new, and in general makes sense.

As we’ve seen across the hotel industry, hotels are doing everything they can to cut out online travel agencies, given the commissions they have to pay them. It could be interesting to see a major hotel group partner with a major airline in hopes of accomplishing something similar, and avoiding having people book through online travel agencies.

The big question is why AccorHotels would have to invest in Air France-KLM in order to make this happen. If they can work something out that’s mutually beneficial, there should be no real investment needed. So do they really think Air France-KLM is a good investment at this point?

What do you make of AccorHotels’ interest in Air France-KLM?

(Tip of the hat to Simon)

Comments

  1. Little notice: AccorHotels wants to buy the share of France because with that their will be the biggest shareholders
    France owns 14% of share but France has 22% of voting power

  2. As the saying goes, “Fools and their money soon part ways!” I would suggest that Accor spend more time and money on their hotel business, and less on foolish ventures like Air France.

    Air France, like Alitalia, need to fundamentally change their business models. Just being able to “Fly the Flag” no longer works for them. Neither company can maintain the status quo forever and there’s no indication that the major stakeholders are willing to make the sacrifices necessary for the carriers to compete in the current marketplace. Both companies need to fold and liquidate, and then see what, if anything, rises from the ashes.

  3. In a (semi) related story, whatever happened to the Virgin Atlantic/AF/KLM joint venture thing that was announced months ago allowing someone to earn/spend on all of those as well as book multi-city/multi-carrier tickets? It seems like everyone forgot about it – including them.

  4. @ scooter. No it has not. A joint venture agreement was signed on 15 May including Air France KLM purchasing 31 % of Virgin . It’s awaiting approval from the regulators.

  5. Accor has been selling lots of assets off in the recent years, scaling back from previous sentiments that owning and managing was the way to go. With all the cash, they see an opportunity to expand, and I don’t blame them – the might be what AF/KLM need to light the fire?

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