Air France given approval for government aid
The French government is set to contribute to a €4 billion recapitalisation effort for Air France-KLM and more than double its shares in the company to 30% after gaining EU approval to cut losses owing to the pandemic.
The aerospace and travel sectors have been ravaged by the coronavirus crisis and have suffered massive losses owing to significant shrinks in demand over the past year with many companies operating losses for the first time in their respective histories.
Read more: Skyrora receives ESA funding for satellite launches
Pushes towards greener energy have also called for new innovations for the travel sector as many global authorities set ambitious and strict climate goals to halt the devastating effects of climate change.
The government are set to convert a €3 billion loan into a hybrid bond and take on a planned additional capital rise of €1 billion.
The Dutch state, which operates a 14% share in the airliner, will not subscribe to this capital rise. However, the company announced the nation's government approved the recapitalisation efforts.
China Eastern Airlines intends to participate while keeping its stake strictly below 10% of share capital, according to Anne-Marie Couderc, a chair on Air France's board of directors, adding the commitment highlights a "resolute confidence in the strengths and prospects of the Air France-KLM Group.”
With this move, the French government will become the single largest shareholder in Air France-KLM.
The agreed conditions require France to find a strategy to reduce its shareholding levels to pre-crisis level by 2027. The company has confirmed that dividends and executive bonuses are being suspended until the debt is repaid.
The stimulus will only benefit the French arm of the company, according to the EU.
Air France-KLM CEO Benjamin Smith said the recapitalisation efforts are an important milestone in it recovering from this "challenging period."
He added: "Ensuring Air France-KLM maintains a sustainable financial trajectory is paramount to realizing our strategic plan, continuing the execution of our transformation plans at the Group and at our airlines.
"We will continue to work together to drive new efficiencies as we seek to lower unit costs and emerge stronger when the industry rebounds with the ambition to achieve European leadership."
Read more: Heckler & Koch must pay for illegal Mexican arms sales, says top German court
The airliner expects to be negatively affected by the pandemic for Q1 2021, most notably by a surge in cases owing to the third wave of coronavirus wave that swept many European nations towards the end of 2020.
The Group expects the operating losses for the first quarter of 2021 to be around €1.3 billion.
The airliner expects a significant demand increase over the summer months and going into the latter half of the year
Back to Homepage
Back to Aerospace & Defence
Back to Transportation