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Ready For Take Off?

08 May 2018 by lberuti

Yesterday, the market for European synthetic credit products was closed as investors enjoyed a sunny Early May Bank Holiday. Most equity markets were open though, and shares in AFKLM ( Air France KLM SA ) fell sharply after the sudden resignation of its chief executive over a pay dispute. Mr Lemaire, France’s finance minister, said that “if Air France does not make the necessary competitiveness efforts that will allow this national flagship to be at the same level as Lufthansa or other major global airlines, Air France will disappear.” He added that the government should not be expected to backstop the company. It did not go down well with investors. The strike has already cost the company €300mln and some are even wandering whether KLM could not be tempted to leave the current alliance given the recent upheaval. AFKLM’s stock fell 10% on Monday and its 5-year risk premium played catch up today. It widened 57bps at 262bps. It has now more than doubled since the tights reached at the end of January.