Air France-KLM and container shipping giant CMA CGM SA are scrapping a year-old cargo alliance, saying tough regulation in some markets prevented the cooperation from properly taking off. 

The two French transporters plan to withdraw from their agreement from the end of March, one year after it took effect, according to separate statements on Tuesday. They will enter talks to operate independently. 

“The tight regulatory environment in certain important markets has prevented the cooperation from working in an optimal way,” the companies said in the statements.

The unwinding of the deal represents a set back for the shipping company, which had planned to use the pact to massively increase operations in air cargo. CMA CGM owns close to 9% stake in the airline, and as part of the retreat from the accord, the lockup on shares was shortened to the end of February, 2025, from a staggered expiry that went until mid-2028, the companies said.

The tie-up announced in 2022 brought the closely held maritime company into Air France’s shareholding during the pandemic as part of a French state-led bailout. Marseille-based CMA CGM, controlled by the billionaire Saade family, was expanding into other forms of transport including air cargo.

“The parties have agreed that CMA CGM will step down from the Air France-KLM board of directors on March 31, 2024, they said. 

At the time of their agreement, they planned to combine their airfreight networks and plane capacity in a 10-year alliance that would include 10 freighter jets and a dozen more on order. Air cargo demand soared during the pandemic as online purchases increased, but growth rates have fallen starkly in the past year.

Air France-KLM fell as much as 24 cents, or 2%, to €11.78 in Paris. The stock has lost 13% in value this year.