PARIS – France and the Netherlands will provide an unprecedented 10 billion euro bailout funded by taxpayers, or about $ 10.8 billion, to save Air France-KLM as the fallout from the coronavirus on the industry of travel impose a devastating toll on global air carriers.
Air France-KLM, one of the largest European airlines, will receive a bank loan of 4 billion euros supported by the French state and a direct public loan of 3 billion euros, announced Friday the Minister of Finance, Bruno Le Maire. The Dutch government has said it will provide additional public aid of between 2 and 4 billion euros.
The infusion of aid is far from nationalizing the company, in which the French and Dutch states each hold a 14% share. The European Commission – the executive branch of the European Union, which lifted restrictions on state support in a deep economic downturn – quickly approved the rescue plan.
It is the third multi-billion dollar lifeline extended last week by the French government to companies hit by the coronavirus.
The government is working on a € 5 billion state-supported loan package for flagship French automaker Renault, Le Maire said on Friday. Sales of Renault – part of the world’s largest automotive alliance with Nissan and Mitsubishi Motors – have been dashed after quarantine of dealerships and factories across Europe. The company had already reported in recent months that the arrest and the escape of its former president, Carlos Ghosn, from Japan in January wreaked havoc on the group.
The state also last week supported a 500 million euro loan for the French giant of electronic distribution FNAC-Darty, which employs tens of thousands of people in France, to help it secure its cash flows. and prepare for recovery from the pandemic.
Since the start of the crisis, the French government has supported more than 20 billion euros in loans for 150,000 companies, as part of a huge tax package to support the economy and limit mass unemployment until businesses can start operating safely again. The French economy is expected to contract by at least 8% this year, the largest decline since the end of the Second World War.
Few industries have been hit as hard as airlines, as travel bans around the world immobilize fleets. International Air Transport Association warned this week that European airlines will see demand drop 55% in 2020 compared to 2019, with total potential of $ 89 billion.
Flights across Europe have dropped 90%, and most carriers don’t expect service to resume until June. The deployment of air traffic may depend on the introduction of government-imposed social distancing measures inside airplanes, the air transport association said.
Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines will participate in the rescue plan, which is part of an economic stabilization plan adopted by Congress last month.
European airlines hit earlier than the United States, after President Trump on March 12 close US borders to most European travelers. While the travel ban has helped slow the spread of the epidemic in the United States, European carriers have struggled to cope.
German airline Lufthansa said on Thursday it would demand government bailouts after the drop in sales, which caused a loss of more than a billion euros in the first quarter, and investors are no longer willing to lend money to society. Passenger traffic has fallen to almost nothing and the second quarter will be even worse, Lufthansa said in a statement.
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Air France, in which the government holds a 14% stake, has put its employees on part-time leave for six months, in accordance with a request from the government not to dismiss workers. The carrier has lost about 25 million euros a day since then, plunging it into a critical financial situation.
With almost all of the company’s planes immobilized, the financial lifeline is needed “to save the 350,000 direct and indirect jobs that go with it,” said Maire.
Air France-KLM managing director Ben Smith, Pilots told a video conference this month that it would probably take two years to recover the level of traffic seen in 2019. The carrier, which hopes to gradually restore flights over the summer, recently warned that ‘in the absence of ticket sales, there would be an urgent need for cash during the July-September quarter to stay afloat.
The support “is not a blank check,” Le Maire said on Friday, adding that governments have set profitability conditions for the carrier.
“This is French money, so the company has to make an effort to be more profitable,” he said. The company will also have to become “the most environmentally responsible company on the planet,” he added.