LONDON (Reuters) – Air France-KLM is considering delaying its planned capital increase due to strict travel restrictions imposed by governments to mitigate the spread of the Omicron variant of the coronavirus, two sources familiar with the plans’ plans told Reuters. company.
The Franco-Dutch carrier hoped to raise at least 1 billion euros ($ 1.13 billion) by the end of the year to consolidate its heavily indebted and pandemic-affected balance sheet and repay government aid, but this should now be delayed, the two sources said, speaking on condition of anonymity.
“The math doesn’t work. They have to sell a salvage story and that doesn’t work with the Omicron hover, ”one of the sources said.
Air France-KLM declined to comment.
The United States, Japan, Hong Kong and a number of European countries are among those that have tightened borders and imposed new restrictions amid uncertainty surrounding the virulence of the new variant and its ability to escape the vaccine protection.
Shares of travel agencies around the world have fallen since news of the variant emerged, with British Airways owner IAG down almost 15% since Friday and Lufthansa and Air France-KLM down around 9%.
The airline has already finalized a € 4 billion recapitalization program in April that included state support and a € 1.036 billion capital increase that doubled the French government’s stake to 30%.
At the end of September, it had more than 10 billion euros in liquidity and can afford to delay the plan. Still, he must repay state aid to lift the EU’s ban on mergers and acquisitions (M&A), a source told the French government.
INCREASE IN DEBT
Air France-KLM chief executive Ben Smith said at the end of September that the company intended to raise new funds “as soon as possible”, without giving a specific date. Government bailouts via perpetual instruments have pushed Air France’s total debt to 10.2 billion euros, Refinitiv Eikon files show, and the company has seen its borrowing costs rise over the past week. .
“I wouldn’t advise them to come into the market anytime soon – market conditions aren’t ideal for any business right now, let alone an unrated travel agency,” said a third source, from the banking industry.
Air France-KLM is not rated by any of the main rating agencies and is therefore not eligible for purchases of corporate debt by the European Central Bank.
(Report by Abhinav Ramnarayan in London and Gwénaëlle Barzic in Paris; edited by Pamela Barbaglia and Kirsten Donovan)