Dusseldorf French shipping giant CMA CGM is using its exuberant sea freight profits to become an anchor shareholder in airline Air France-KLM. Both companies announced this on Wednesday. The shipping group from Marseille is to take over nine percent of the airline.
The investment could come as part of a planned capital increase by Air France-KLM, which had already been announced in mid-February. At the annual general meeting on May 24, a shipping company representative is then to be elected to the board of directors.
Entry is likely to cost CMA CGM more than half a billion euros. The Air France-KLM stock exchange is currently only valued at 2.67 billion euros after the airline went deep into the red during the corona pandemic. However, the top management is aiming for a capital increase of over four billion euros in order to repay the French government aid for Air France. This would make the agreed block of shares significantly more expensive.
However, the shipping company, which had to struggle with high losses just a few years ago, is no longer short of money. CMA CGM closed the past financial year with a net profit of 17.9 billion euros, which was ten times the previous year.
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Sea traffic, which has been repeatedly disrupted by port closures, has meant that global freight rates have at times increased more than sixfold since the summer of 2020. This has massively filled the coffers of the global container shipping companies.
>> Read also: Shipping companies invest billions in acquisitions from the logistics industry
For CMA CGM, the third largest container shipping company in the world after its rivals MSC and Maersk, the planned entry into the Franco-Dutch airline is not just a capital investment, but also a strategically important step.
“This partnership is fully in line with CMA CGM’s strategy to become a leader in integrated logistics,” said CEO Rodolphe Saadé on Wednesday. “It enables us to significantly accelerate the development of our air transport division, which we have just established.” Now, together with Air France-KLM, the shipping company will be positioned “among the world’s leading players in air freight”.
Shipping companies are buying heavily
Like many other container shipping companies, the French are no longer satisfied with the transport business at sea. Since the summer, the market-leading shipping companies MSC, Maersk and CMA CGM in particular have been using the profits they have made thanks to the high freight rates to extend the ranges of their supply chains.
Purchases are made in overland transport, from warehousing providers and port terminals, but especially in the air freight business. At the beginning of the year, the Geneva rival MSC allied with the German Lufthansa to reach for the Alitalia successor company Ita Airways. A few weeks ago, Hapag-Lloyd’s major shareholder Klaus-Michael Kühne joined Lufthansa with just over ten percent.
The Danish shipping company Maersk also announced a new air freight service under the name “Maersk Air Cargo”. Maersk logistics manager Aymeric Chandavoine recently justified the shopping spree by wanting to use their own capacities to deliver “from the factory to the sofa”.
With the industrial cooperation announced on Wednesday, CMA CGM is now also pushing ahead with the plan to develop end-to-end shipping and logistics solutions for customers. The starting shot was fired in 2019 when the contract logistics company Ceva was taken over. Contract logisticians usually offer warehousing services, returns logistics and freight forwarding services.
With a total budget of ten billion euros, the French shipping company’s investment and purchasing tour continued in 2021. CEO Saadé made three billion dollars available to take over part of the US IT company Ingram Micro, including 59 logistics centers on both sides of the Atlantic. In Los Angeles, the container terminal Fenix Marine Services was acquired for $1.8 billion.
In April 2022, CMA CGM also bought the car transporter Gefco, which had previously belonged to Stellantis and the Russian railway company RZD, for around half a billion euros. In order to penetrate deeper into the e-commerce business, the shipping company also took a majority stake in the French parcel service Colis Privé at the end of January. With it, she closes the gap to the end customer.
DB Schenker is already a customer
The shipping group also sealed its entry into the air freight business last year. In March 2021, Saadé founded “CMA CGM Air Cargo”, which has so far been operated by Air Belgium with four Airbus 330Fs. Two Boeing 777F cargo planes are to follow in a few weeks, and four more Airbus 350Fs have been ordered for 2025 and 2026.
With its aircargo business, which started in 2021, the French shipping company has already found prominent customers. “We have been using their air freight capacities for several months,” DB Schenker board member Thorsten Meincke told Handelsblatt.
The two French groups want to join forces.
(Photo: Reuters)
The shipping company now wants to combine its own air freight network with Air France-KLM for at least ten years. “Air France-KLM and CMA CGM will join and operate exclusively in each airline’s cargo aircraft capacity,” the statement said. The fleet will initially consist of ten cargo planes, with twelve more on order. The commercial partnership also includes the cargo hold capacity of Air France KLM passenger aircraft, the so-called belly storage space.
All of this is tantamount to a declaration of war. With an annual freight volume of 1.2 million tons, Air France-KLM recently ranked among the top ten in the industry.
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