Short interest in Air France – KLM (OTCMKTS:AFLYY) (EPA:AF), the French flag carrier airline, is on the rise according to disclosures filed with the French regulatory authority, AMF. In the past few days, several hedge funds have increased their shorts in the French airline. Most notably, London-based hedge funds Marshall Wace and Odey Asset Management have held negative bets in the company for some time now.
Air France – KLM is handling a number of troubles
Air France – KLM (OTCMKTS:AFLYY) (EPA:AF) is handling a number of troubles these days. The company itself wrote to the French government detailing the many problems that ailed it. In the letter, Air France said that it was in serious economic, financial and social difficulties. The letter further appealed:
“We urge you and your government to freeze any new allocation of traffic rights until a more equitable competition is established…We ask you to act… to create a power balance between European airlines and those of the Gulf.”
Currently the largest short bet is held by Odey Asset Management, which holds a 1.3 percent short. The second largest position is held by Marshall Wace, which stands at 1.08 percent of outstanding shares. Another hedge fund, Standard Pacific Capital, has a 0.66 percent position. Och-Ziff has a 0.79 percent position, whereas TT International has a 0.69 percent position. World Quant and Highbridge Capital have covered their position to below 0.5 percent in the last few days.
Air France faces increasing competition from foreign airlines
Air France – KLM (OTCMKTS:AFLYY) (EPA:AF) faces increasing competition from foreign airlines such as Emirates, which recently won rights from the French government for additional traffic. The letter from Air France’s unions explained that Gulf carriers have experienced manifold increases in market shares between 2005-2010, whereas European carriers have lost market presence during this time. The French airline is already growing in loss and sales have been falling every quarter; net profit margins were down -2.08 percent in last quarter as well. Shares of Air France are down 3.3 percent YTD.
GMO, Vanguard Group and Invesco Asset Management have long positions in Air France – KLM (OTCMKTS:AFLYY) (EPA:AF). One good piece of news for Air France was that its was named the leader in the Dow Jones 2013 Sustainability Index along with Nestle SA (VTX:NESN) and Volkswagen AG (ETR:VOW) (FRA:VOW).