CMA CGM, Air France-KLM to end cargo tie-up on US regulatory snag

By Gus Trompiz and Tassilo Hummel

PARIS (Reuters) -Shipping giant CMA CGM and French-Dutch carrier Air France-KLM (LON:0LN7) will end their air cargo alliance after a row over flight slots at Amsterdam airport cast doubt over regulatory approval in the massive U.S. market.

The cargo partnership, struck in May 2022 in parallel to a deal that saw CMA CGM become a shareholder of Air France-KLM, was part of a push by Marseille-based CMA CGM to expand its reach in logistics, supported by huge shipping profits in the wake of the COVID-19 pandemic.

"The tight regulatory environment in certain important markets has prevented the cooperation from working in an optimal way," the companies said in a statement.

"As a consequence, Air France-KLM and CMA CGM today announce their decision to withdraw from their existing agreements from March 31, 2024."

The regulatory aspect was related to the United States, as prospects for antitrust clearance were complicated by tensions over Amsterdam's Schiphol Airport, two sources familiar with the matter said.

Plans announced last year by the Dutch government to cut the number of flights landing at Schiphol to reduce pollution angered operators, including U.S. carrier JetBlue, which asked the U.S. government to pursue countermeasures.

The Dutch authorities later suspended the plan but the sources said the context remained unfavourable for CMA CGM and Air France KLM's partnership to get clearance in the United States.

Air France and CMA CGM are discussing terms for future cooperation in freight as independent operators, they said in the statement.

CMA CGM will remain a core shareholder of Air France-KLM but will leave its board on March 31, the companies said.

A share lock-up agreement will also be modified, with the lock-up now to expire completely on Feb. 28, 2025.

Previously, the lock-up was to expire initially on June 15, 2025, followed by a subsequent lock-up period on 50% of shares until June 15, 2028.

CMA CGM controls about 9% of Air France-KLM's capital.

Air France-KLM shares were down 3% in mid-morning trading.

The two companies had struck the deal after banking on growing demand for flying goods around the world as supply chains remained snarled in the wake of the pandemic.

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Deteriorated market conditions, reflecting economic and geopolitical pressures as well as increased capacity from other cargo operators, were also a factor in ending the alliance, one of the sources said.