The European Commission has approved the French government’s €7 billion bailout of Air France-KLM to help it survive the COVID-19 pandemic.
The fund, consisting of a €4 billion state-backed bank loan and €3 billion in direct loans, is aimed at protecting the 350,000 jobs sustained by the airline.
Margrethe Vestager, the EU’s competition chief, said, “The aviation industry is important in terms of jobs and connectivity. This €7 billion French guarantee and shareholder loan will provide Air France with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak.
“The aviation industry is important in terms of jobs and connectivity. In the context of the coronavirus outbreak, Air France has also been playing an essential role in the repatriation of citizens and for the transport of medical equipment.
“We have co-operated closely with France, as with many other member states, to ensure that public support to tackle the current crisis can be put in place as quickly and effectively as possible, in line with EU rules.”
The bailout comes with strings attached, including one to be a “good customer” for European plane manufacturer Airbus. They also require Air France to scrap short-haul domestic routes where there is a train connection available under 2.5 hours, to help cut carbon emissions.
In an added attempt to strengthen its financial position and secure more funds, Air France will enter into a sale and leaseback agreement for 16 of its A320 family aircraft. According to CH-Aviation, this will consist of six A319-100s and 10 A318-100s.
Bloomberg has reported that the Netherlands is still deciding on the final details and amount for its support to KLM. Still, it has said it would land somewhere between €2 billion and €4 billion.
The French and Dutch governments each own close to 14 per cent of Air France-KLM and there are some tensions rising between rival union groups.
Air France-KLM’s French unions on Monday criticised calls by their Dutch counterparts for KLM to be given greater autonomy.
In Dutch media interviews, the KLM union chief suggested the relationship between the airlines and the combined Air France-KLM holding company should be loosened in response to the “exploding” debt on the Air France side.
“The prenuptial agreement will have to change,” Dario Fucci, head of the KLM works council, was quoted as saying in De Telegraaf newspaper. “We want to buy fuel and sell tickets together, but that’s the end of it.”
