AIR FRANCE-KLM SECURES €7 BILLION IN STATE AID

The Air France-KLM Group and Air France has agreed the details of a €7 billion state aid package for the airline following several weeks of discussions with the French state and banking institutions.

On April 9 Air France-KLM warned that due to COVID 19 that it would need a liquidity injection in the third quarter of 2020 to keep it in the air – a situation which has been avoided by the deal with the French state. The Dutch state has also stated its intention to support the KLM Group. Discussions to finalise the aspects and conditions of an additional aid are ongoing.

This current batch of aid is made up of a French state-backed loan of €4 billion granted by a syndicate of six banks to Air France-KLM and Air France.  The French state is guaranteeing this loan up to 90%, and it has a maturity of 12 months, with two consecutive one-year extension options exercisable by Air France-KLM;

It also includes a direct shareholder’s loan of €3 billion from the French state to Air France-KLM with a maturity of four years, with two consecutive one-year extension options exercisable by Air France-KLM.

This aid mechanism, which remains subject to approval by the European Commission, will enable the Air France-KLM Group to provide Air France with the means necessary to meet its obligations by continuing its transformation in order to adapt in a sector that the global crisis will severely disrupt.

The transformation plan, which will be finalized in the coming months, will include economic, financial and environmental commitments. It will notably involve a review of Air France’s activities looking to adapt them to the new market reality brought about by the crisis, and will have to strengthen its financial situation. This transformation will also contain an ambitious environmental roadmap to accelerate the Group’s sustainable transition.

Once this plan has been finalised and when better visibility on post-crisis air traffic levels becomes available, the Air France-KLM Board of Directors will consider increasing its equity capital subject to market conditions.  At the latest, this could occur at the latest following the Board meeting scheduled to approve the financial statements for 2020.

In this context, the French state has indicated its intention to examine the conditions under which it might participate in such an operation to increase its capital.