AccorHotels, Europe's largest hotelier, said it had decided to drop plans to buy a minority stake in Air France-KLM as it felt that conditions necessary for the deal had not been met at this stage.
Accor made the announcement as it posted a 4.2 per cent rise in first-half operating profit, driven by restructuring efforts and robust demand in all key regions, and it predicted a further rise in profits for the full year.
Last month, AccorHotels had said it was looking at taking a minority stake in Air France-KLM to help it compete better against travel packages offered by online rivals such as Expedia and Booking.com.
However, it said it had since decided to abandon that plan.
"AccorHotels remains convinced of the strong potential for value creation of strengthened ties between hoteliers and airlines. However, the group considers that conditions for taking a minority stake in Air France-KLM have not been met at this stage and has thus decided not to pursue further this opportunity," the company said in a statement.
Accor, which runs high-end chains such as Raffles and Sofitel as well as budget brands such as Ibis, said first-half EBITDA (earnings before interest, tax, depreciation and amortisation) rose 4.2 per cent on a like-for-like basis to 291 million euros ($341.28 million), slightly above the €266 million average forecast in a ThomsonReuters poll.
For the full year of 2018, it forecast EBITDA of between €690 million and €720 million.
AccorHotels has been cutting costs, expanding in the luxury end of the market and investing in new areas such as concierge services, to boost its growth and fight the rising challenges posed by companies such as Airbnb and online travel agents.
While some investors said they saw some sense in a tie-up between AccorHotels and Air France-KLM, notably through cooperation on loyalty programmes, others had questioned why Accor would need to buy a stake in the troubled airline.
Anne-Marie Couderc, the interim chairman of Air France KLM had also blamed AccorHotels for complicating and delaying the airline's search for a new chief executive, according to an internal memo seen by Reuters.
The airline has been hunting for a new boss to fill a gap left by the abrupt departure of chief executive Jean-Marc Janaillac in May, after staff rejected a pay proposal aimed at ending strikes that have resulted in heavy losses.
In February, AccorHotels agreed to sell 55 per cent of its AccorInvest property business to sovereign and institutional investors for €4.4 billion, saying it would use part of the cash to fund acquisitions.
On Thursday, AccorHotels said it had received a binding offer from Colony NorthStar to buy an additional tranche of 7 per cent of AccorInvest for €250 million.
Upon completion of the deal, Accor will retain 35.2 per cent in AccorInvest.