AccorHotels, Europe's largest hotelier, said it had abandoned plans to buy a minority stake in Air France-KLM, which has been hit by boardroom and staff unrest.
While some investors said they saw 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.
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.
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.
Accor made the announcement as it posted a 4.2 percent 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 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.
An Air France-KLM spokeswoman said the airline had no comment on Accor's decision.
The French government has a stake of about 14 percent in Air France-KLM, while Delta Airlines and China Eastern Airlines each hold 8.8 percent.
Air France-KLM shares initially fell before recovering to stand 2 percent higher in early trading. Accor shares slipped 0.9 percent, with UBS analysts describing Accor's results as weaker than forecast.
"Buying a stake in the airline did not look like a logical move," said Roche Brune Asset Management fund manager Gregoire Laverne, whose firm has sold its Accor shares.
"It would be better if Accor looked for joint ventures or partnerships in this area," he added.
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.
In February, AccorHotels agreed to sell 55 percent of its AccorInvest property business to sovereign and institutional investors for 4.4 billion euros ($5.2 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 percent of AccorInvest for 250 million euros.Upon completion of the deal, Accor will retain 35.2 percent in AccorInvest.