The French state will inject up to 4 billion euros into Air France-KLM
France will contribute up to 4 billion euros to strengthen Air France-KLM’s balance sheet, potentially doubling its stake as it tries to guide the airline through the worst of the Covid-19 pandemic.
The French State, already a 14.3% shareholder, will convert 3 billion euros in loans it granted to Air France last year into perpetual hybrid debt and will participate in an additional capital increase planned for up to 1 billion euros.
Overall, the government’s stake could reach 29.9%, which would make it the first sole shareholder, French Finance Minister Bruno Le Maire told France Inter radio on Tuesday morning.
Benjamin Smith, managing director of the airline, said: “It gives us stability. . . despite all the uncertainty we have in our industry today.“
“We have drawn up a very comprehensive plan, in the medium and long term, which with the evolution of the union agreements that we have put in place, we believe that we can have the platform to really make Air France profitable,” he said. he adds.
This round of state aid will only benefit the French branch of Air France-KLM, the EU has said.
The Dutch state, which is also a 14% shareholder, will not participate in the new capital increase, said Air France-KLM in its press release, but “is continuing discussions with the European Commission concerning possible measures to strengthen the capital of KLM ”.
Tensions between France and the Netherlands came to a head in 2019 when the Dutch government increased its participation to roughly match that of the French state, in order to protect its national interests.
“As AF-KLM is still expected to have negative equity after these transactions, the company said further equity / quasi-equity transactions could potentially be completed before the annual general meeting. 2022, ”Morgan Stanley analysts said.
After months of negotiations between France and the EU to get state aid approved, Air France-KLM had to give up 18 of its more than 300 landing and take-off slots at Paris-Orly. This is less than the 24 initially requested by the commission.
The Mayor said some low-cost airlines would be subject to restrictions on reclaiming slots, to ensure companies operating at the airport comply with French labor rules.
The commission said on Tuesday that France is committed to developing a credible exit strategy within 12 months of granting aid, unless aid has fallen below 25% of its own funds. ‘here there.
He added that until the recapitalization was repaid, Air France was prohibited from paying dividends and making share buybacks. There are also limits on salaries and bonuses.
Along with the rest of the sector, Air France-KLM, born from the merger of Air France and KLM of the Netherlands in 2004, was struck by the impact of Covid-19 on tourism and business travel.
Smith had been credited for having started the recovery of Air France before the crisis broke. But with the pandemic of reduced demand for air travel, the group recorded a net loss of € 7.1 billion in 2020. On Tuesday, the group announced that it expected a loss of 1.3 billion euros. billion euros in the first quarter.
Cash consumption at Air France stands at 10 million euros per day, Smith said, with good momentum in the US market, which could potentially limit further cash consumption due to EU restrictions .
Smith expects the group’s cash consumption to reach zero in 2023, but said that with “nearly $ 9 billion in cash. . . for the short to medium term liquidity is not an issue“.
In addition to the € 3bn loan directly from France, Air France-KLM received € 7.4bn in loans guaranteed by the French and Dutch governments to help him get through the pandemic. The loan guaranteed by the French state, with cost and environmental targets, has been extended until 2023, with the Dutch loan due in 2025.
“I would like to believe that France and the rest of Europe are probably three to four months behind the United States. So with that ray of light, it gives us cautious optimism, ”Smith said.
“So how do we bounce back over the next couple of months when there’s a difference in speed and getting these vaccines? Well, like we’ve been doing over the last year, we’re gonna handle this, ” he said.