KLM Sues Over Northwest’s Defense Plan : Mergers: The U.S. carrier’s proposal would limit the Dutch airline’s stake in a combined company.

With takeover speculation rumbling through the airline industry, KLM Royal Dutch Airlines on Wednesday sued Northwest Airlines executives in a power play to maintain its stake in the lucrative airline.

The lawsuit is over a proposed Northwest takeover defense that would limit the stake of shareholders and allow mergers and other major transactions to be approved by a simple majority of board members.

Northwest’s so-called shareholder rights plan could force KLM to sell some of its 21.5% voting stake in the airline.

The lawsuit puts a strain on what has been a good relationship since the two airlines teamed up in a marketing alliance five years ago. And KLM helped bail Northwest out of its near-bankruptcy in 1993.

“It’s like next-door neighbors that seem nice and friendly and all of a sudden they are having a fight on the porch and everyone can hear them,” said Brian Harris, an airline analyst at S.G. Warburg.

Northwest spokesman Jon Austin called the lawsuit “bizarre and meritless.”

KLM has an option to buy more shares in 1998, which would bring its voting interest to 25%--the limit for non-U.S. interests under federal law.

Airline analyst Raymond Neidl of Furman Selz said KLM doesn’t want to lose any ground with Northwest, which is enjoying its best year ever and had a third-quarter net income of $231 million.

“KLM is more interested in protecting its rights and keeping [Northwest Co-Chairmen Al Checchi and Gary Wilson] from getting too strong an equity position . . . now that the company has turned around and come back so strongly,” he said.

Northwest shares eased 62.5 cents to $46.50 on Nasdaq.