Air France-KLM obtains at least 9 billion euros in French and Dutch loans

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Air France-KLM has won nearly € 10 billion in state aid from the French and Dutch governments to avoid a tightening of liquidity due to the economic effects of the coronavirus on the aviation sector.

On Friday evening, the French government confirmed that it had accepted a 7 billion euro loan package for the airline, while the Dutch government said it was still in talks but had committed between 2 and 4 billion euros.

“Air France planes are immobilized, so we must support Air France”, said Friday evening on television Bruno Le Maire, French Minister of Finance, adding that the loans would be subject to conditions, in particular: “Air France must become the most environmentally friendly company. on the planet “.

Le Maire also confirmed that France was working on an agreement for the automaker Renault which would amount to around 5 billion euros.

Air France-KLM’s shares have dropped 55% so far this year, as the entire airline industry has been devastated by the closures put in place to stop the spread of the coronavirus.

Assistance from the French government will take the form of a loan of 4 billion euros, 90% of which will be guaranteed by the state, and which will be granted by a consortium of six French and international banks. It has a 12-month maturity, with two consecutive one-year extension options exercisable by Air France-KLM.

An additional € 3 billion will take the form of a direct loan from the State as part of a € 20 billion fund managed by the State Participations Agency, responsible for the participations of the State. This loan will have a four-year maturity, with two consecutive one-year extension options exercisable by Air France-KLM.

The loans, said the French Ministry of Finance without giving more details, are “intended only for the needs of the Air France subsidiary”. The state currently owns 14.3% of the airline, while the Dutch state owns 14%.

“The Dutch government has also announced its intention to support the KLM group,” the Dutch arm of the airline, and talks are continuing, Air France-KLM said in a statement Friday evening.

Wopke Hoekstra, Dutch Minister of Finance, said the Netherlands would inject between € 2 billion and € 4 billion in support for KLM.

In return, the Dutch government – which bought its 14% stake in the group last year – would demand the suspension of all dividends and bonuses, Hoekstra said at an emergency press conference on Friday evening . The government will encourage senior KLM executives to sacrifice their salaries.

The Dutch Ministry of Finance said it was about to decide on the precise amount of aid to offer, but that it should take the form of a state guarantee and a loan.

“We have always indicated that we are doing everything to help Air France-KLM get through this crisis,” said Mr. Hoekstra. “The location of Schiphol Airport is of great importance to the Dutch economy and jobs.”

Without government funding, which has yet to be approved in Brussels, the group said, “a liquidity injection would be required in the third quarter of 2020”.

An Air France-KLM transformation plan “will be finalized in the coming months”, added the airline, and once this has happened and “when there is better visibility of post-crisis air traffic levels will be available “, the airline” will consider increasing its equity “. capital subject to market conditions ”.

Air France-KLM said that “the French state has indicated its intention to examine the conditions under which it could participate in such an operation to increase its capital”.

If Air France-KLM issues new shares, Hoekstra said the Dutch government would consider increasing its stake in the airline.

Le Maire also confirmed that the State was preparing a loan of 5 billion euros for the French car manufacturer Renault which, at the start of the week, declared that it was spending 600 million euros per month in cash, excluding working capital. The government is also the largest shareholder in Renault, with just over 15% of the capital.

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