Aid to Air France-KLM authorized and the French State will control 30%.

The European Commission gave its approval Tuesday to a recapitalization plan for Air France-KLM that will involve an injection of up to 4 billion euros and will mainly result in the French state doubling its stake to nearly 30%.

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“The public support will come with conditions, in particular to ensure that the French state receives sufficient remuneration (for the money it will put into the company) and other measures to limit distortions of competition,” said Commission executive vice-president Margrethe Vestager.

In particular, the Franco-Dutch group has committed to cede 18 take-off and landing rights (“slots”) at Paris’s Orly airport, which are in high demand because it is the closest to the French capital and because of the limitations on operations due to its size and the night-time closure of its runways, reported EFE.

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This transfer, which represents 4% of the rights that Air France-KLM currently has at Orly, will be conditional on the airline that takes them using the airport as a base for its aircraft and crews.

This means – the Franco-Dutch company specified in a statement – that the personnel will have to be subject to the rules of French and European labor law, which should exclude the Irish low-cost airline Ryanair, which was one of the main candidates to recover them, and which for now flies from Beauvais airport, 80 kilometers from Paris.

As for the 4 billion euro injection, it is broken down into a 4-year 3 billion euro loan from the French State, after which it can be converted into capital, and a further 1 billion euro in the form of a new share issue.

The French state, which currently controls 14.3% of Air France-KLM, will now hold almost 30% of the airline.

China Eastern Airlines, which controls 8.8%, has committed to participate in the capital increase but will hold “strictly less than 10%”.

Neither the Dutch government, which until now has been on an almost equal footing with the French government with 14%, nor Delta Airlines, which owns another 8.8%, will subscribe to new shares.

The Dutch government, which has given the green light to this scheme, will continue discussions with Brussels on potential measures to strengthen the capital of the KLM component.

The French Minister of Economy and Finance, Bruno Le Maire, explained that “it has been a long and difficult negotiation” and pointed out that the state intervention “is not a blank check” as the management will have to continue taking decisions to improve the company’s profitability.

This in a still difficult context because while air traffic has almost normalized in Asia and is at 80% of the pre-crisis level in North America, in Europe only 40% has recovered and a return to the pre-covid situation is not expected before 2024.

This is having an effect on the income statement of Air France-KLM, which acknowledged that after the 7,078 million euros it lost in 2020, it has continued to suffer the negative impact of the crisis during the first quarter of the year.

HARD CRISIS

Between January and March, it anticipates a loss in operating income of around 1.3 billion euros, with ebitda of around 750 million euros, also negative.

For the coming months, and in particular with the start of the summer, he expects “a significant recovery in demand” thanks to vaccination campaigns that should make it possible to relax travel restrictions.

Le Maire said that among the conditions imposed on the company are environmental ones, with the aim of making Air France “the most planet-friendly airline”.

The government will also demand environmental improvements to “make Air France the most planet-friendly airline”.

To this end, it will have to “halve emissions per passenger by 2030 (…) use green fuels, eliminate routes when there is an alternative by train less than two and a half hours away and renew its fleet to have planes that consume less fossil fuel”, the minister indicated.

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