Heard Wednesday in the Senate, Anne-Marie Couderc who chairs the Air France KLM group, was very clear. The French government's announcement of massive aid to Air France was a matter of days. She was right. Friday evening, after a board meeting, the State, which owns 14.3% of the Air France KLM group, unveiled its plan to fly to the rescue of its national airline.
The financial envelope is impressive: 7 billion euros will be contributed to Air France from the beginning of May. This support will be provided in two ways: on the one hand, € 4 billion in bank loans guaranteed by the State at 90%; on the other hand, a shareholder advance by the State of 3 billion, which Bercy will draw from the envelope of 20 billion intended for capital operations voted in the framework of the last amending finance law.
KLM should also benefit from aid from the Dutch state. We are talking about 3 billion. But this plan should not be ready for a few days or even a few weeks.
This intervention by the French State in favor of Air France is anything but a surprise. As early as mid-March, the government claimed it would support its flagship company. On April 8, Bruno Le Maire, put the points on the i: "This is not a boost that Air France is going to need, it is massive support from the State , declared the Minister of Economy. And Air France will have this massive support from the State. We want to preserve the airline, which is a French industrial flagship, at all costs . "
There was an urgent need for the State to keep its promise because, in this period when world transport is almost at a standstill, Air France KLM is playing with its survival like others. "A need for liquidity is expected in the third quarter of 2020," acknowledged Anne-Marie Couderc on Wednesday. Because even if Air France has an activity reduced to less than 5% of its usual offer and therefore a tiny turnover, its fixed costs (loans to pay for planes, maintenance, personnel costs despite the use of short-time working…) remain huge. As a result, the Air France KLM group is losing 25 million euros per day.
French state aid was all the more expected as many other countries have already drawn their plan to save their companies. Singapore bailed out Singapore Airlines. The Trump administration has developed a package of measures for airlines worth up to $ 50 billion (25 billion in loans and 25 billion in aid).
This contribution of fresh money will be welcome for Air France because air transport risks being in turmoil for a long time. "A scenario seems to be emerging which could be a return to the level of activity from 2019 around 2022" , declared on Wednesday in the Senate the director general of Air France KLM, Ben Smith. This help, the group also counts on it to be able to participate in the consolidation of the sector which, according to Ben Smith will take place "in the world and in Europe." Clearly, at the end of the crisis, be able to buy companies in bad shape or enter their capital.
If France has taken time to complete this rescue plan, it is for several reasons. First, it had to coordinate with the Netherlands, also shareholders of the Air France KLM group to the tune of 14.3%, with whom relations over the group's governance are often tormented.
To convince French banks - two of the largest French banks would miss the call for this rescue of space - and international banks, the French State had to guarantee loans up to 90% rather than 70%. Above all, it must make a commitment now, through the shareholder advance which gives guarantees of a future recapitalization. "The involvement of banks shows their confidence," said a source familiar with the matter.
Hop! under pressure
In return, Air France has committed to making two copies: an economic plan, which must make, according to someone familiar with the matter, "Air France one of the most profitable companies in its category" , and an ecological plan .
The group's transformation plan presented in November will be "stepped up," said Ben Smith on Wednesday. The Air France domestic network structurally in heavy losses could be revised downwards. Among the ideas mentioned, reduce the interregional links provided by Hop! and transfer Air France routes from Orly to Transavia, the group's low-cost subsidiary.
This restructuring will join ecological ambition. For the government, the plane is no longer justified when there is a rail alternative in less than two and a half hours (except to power the hub). The company will also continue to offset 100% of its carbon emissions on all its domestic flights as it has been doing for a few months. And it will continue to renew its fleet at the rate planned with planes that consume less fuel. The government needed this commitment: it would have been difficult to lend billions if its flagship company did not make efforts in this area at a time when the responsibility of air transport for global warming was singled out.
The same advice for all files
Two banks - Crédit agricole CIB and Citi - and a law firm - Allen & Overy - will support Bercy for all of the major “hot” files of the coming weeks and months.
This “horizontal mandate” relates, from concordant sources, to the implementation of loans guaranteed by the State (PGE) to very large companies, and in particular to groups of the portfolio of the State shareholder, as well as to the deployment of 20 billion euros planned - at this stage - for possible capital transactions and included in the just adopted amending finance law.
The PGE procedure for large groups was released last weekend by Fnac Darty (500 million euros, 70% guaranteed by the State).
The Air France file, closed on Friday, was much more complex. The company is advised by HSBC bank. The State is also supported by the BDGS cabinet for the occasion.
