Waving the flag-carrier

27 April 2020 By Ed Cropley Follow @edwardcropley

The French and Dutch governments are lending their respective parts of the ailing carrier up to 11 bln euros. The tricky bailout exposes the frailty of the 2004 merger. Germany’s Lufthansa, which owns Swiss and Austrian, and Anglo-Spanish operator IAG may face similar challenges.

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Air France-KLM on April 24 secured 7 billion euros in French government aid to help Air France survive the coronavirus crisis, which has grounded airline fleets across the world.

The Dutch government said it was preparing further support of 2 billion euros to 4 billion euros for KLM, the merged carrier’s Dutch arm.

The French government will issue a 3 billion euro loan directly to Air France-KLM and Air France, and underwrite 90% of a 4 billion euro loan from commercial banks, the airline said.

The direct loan will have a four-year maturity, extendable for up to two more years. The guaranteed loan has a maturity of 12 months, also with a possible two-year extension.

Chief Executive Ben Smith denied the aid was a “blank cheque” and said it required tough action on costs and performance. Neither the government nor Air France gave any further details.

The airline, in which the French and Dutch governments both hold 14% stakes, said it was committed to “ambitious” environmental targets as part of a wider transformation plan, and might have to raise more capital from shareholders.

Air France-KLM shares were up 4% at 4.63 euros by 0830 GMT on April 27.

Context News

Air France-KLM on April 24 secured 7 billion euros in French government aid to help Air France survive the coronavirus crisis, which has grounded airline fleets across the world.

The Dutch government said it was preparing further support of 2 billion euros to 4 billion euros for KLM, the merged carrier’s Dutch arm.

The French government will issue a 3 billion euro loan directly to Air France-KLM and Air France, and underwrite 90% of a 4 billion euro loan from commercial banks, the airline said.

The direct loan will have a four-year maturity, extendable for up to two more years. The guaranteed loan has a maturity of 12 months, also with a possible two-year extension.

Chief Executive Ben Smith denied the aid was a “blank cheque” and said it required tough action on costs and performance. Neither the government nor Air France gave any further details.

Air France-KLM shares were up 4% at 4.63 euros by 0830 GMT on April 27.

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