Thursday 7 May 2020

Ownership and control

The line between state-owned and 'private' firms starts getting messy in bailout-worlds. 

AUT's excellent Akshaya Kamalnath provides an interesting example with the bailout conditions on Air France - KLM.
There’s much to say on the topic of airline bailouts unfortunately. Today’s post is about Air France-KLM and the strings its bailout comes with. (My previous posts on this are here and here.)

Apparently the French government will make a loan of £6.15bn to the airline on the condition that it scraps domestic air routes. The stated motivation for this is environmental do-goodery. Bruno Le Maire, the economy minister, provided the following reasoning: “When you can travel by train in less than two and a half hours, there is no justification for taking a plane.”

We talk about conflicts of interest in corporate law all the time. Usually, this is in the context of board decisions. Let’s use the same lens to examine this bailout condition and ask, who owns the French Railways (SNCF). No prizes for guessing that it is fully state-owned. Incidentally the SNCF has also been running under losses since before COVID-19 and the situation has only worsened after COVID-19.

(Thanks to Leonid Sirota for inspiring this post.)
And Leonid is also at AUT in laws. Huh. I'd known they had an interesting econ department doing lots of administrative data work; hadn't twigged that both Leonid and Akshaya were at the law school there.

Foreign students fleeing to New Zealand could consider putting together an interesting joint degree between the two departments.

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