Air France-KLM confident in bailout after mammoth US$8.5bn loss

written by Hannah Dowling | February 19, 2021
An Air France Airbus A380. (Rob Finlayson)
An Air France Airbus A380. (Rob Finlayson)

Air France-KLM has posted a mammoth US$8.5 billion loss in 2020, however remains “confident” it will be imminently offered additional state aid.

In regard to the timing of said government bailout, group chief financial officer Frédéric Gagey said it “is more a question of days and weeks than quarters”.

Lengthy discussions over the structure of such a bailout continue with both French and Dutch officials, as well as the European Commission, and could be “equity or quasi-equity”.

The EU is also reportedly pushing for Air France-KLM to give up its slots at Paris Orly and Amsterdam Schiphol airports in exchange for financial aid.

Group chief executive Ben Smith said that the airlines are pushing for any state aid to be “proportionate and comparable with what Lufthansa has released”.

Lufthansa secured a US$10 billion government bailout in July last year, that came with conditions, including the sacrifice of key airport slots.

“So we are negotiating with the European Commission and we’re hopeful that we will have an agreement  . . .  In the short term,” Smith said.

Last year, Air France-KLM already accepted US$13.4 billion in state-backed loans and guarantees from France and the Netherlands.

The group burnt through US$3.1 billion in the fourth quarter alone, and saw a net loss of US$1.2 billion.

It said the first three months 2021 are set to be “challenging”, and result in an even bigger hit to revenue.

The airline’s current forecast suggests it will only fly at 40 per cent of its pre-pandemic capacity in the January-March quarter, in light of tighter travel restrictions in France and throughout Europe.

The group collectively slashed its workforce by 10 per cent, or 8,700 full-time equivalent positions over 2020, and announced it has planned for an additional 6,000 cuts “in the coming years”.

The group said its medium-term operating margin objective of 7 to 8 per cent was “unchanged, but delayed”.

As such, Air France-KLM said its medium-term operating margin objective of 7 to 8 per cent was “unchanged, but delayed”.

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