/cloudfront-eu-central-1.images.arcpublishing.com/prisa/VGREABORVNCC5FSS24C3LFD6LA.jpg)
An Air France plane at Paris' Charles de Gaulle airport in 2020.Christian Hartmann / Reuters
France will contribute 4,000 million euros to recapitalize Air France-KLM, which will make the French state the first shareholder of the airline with almost 30% of the company's shares.
The agreement, launched after receiving the approval of Brussels this Tuesday, contemplates that, in exchange for the financial rescue, Air France cedes slots in the Parisian airport of Orly, although less than those initially demanded by the European Commission.
"This is good news for Air France and for all French people", the French Minister of Economy, Bruno Le Maire, celebrated on the France Inter station, where he confirmed an agreement that will allow the participation of the French State to pass from the current 14.3 % to “a little less than 30%”.
In a joint statement with its Dutch counterpart, Wopke Hoestra, Le Maire also underlines that "the French State does not intend, through this operation, to acquire more than 29.9% of the capital of Air France-KLM or to gain control" of The airline.
As specified by Air France-KLM, the group that integrates the former French and Dutch flag airlines, the contribution from France, which is part of the first stage of the group's recapitalization plan, includes the conversion of the state loan of 3,000 million euros already granted by Paris (approved by the Commission in May 2020) in a hybrid capital instrument.
Added to this is an injection of capital by the State, through the subscription of new shares in a capital increase open to existing shareholders and the market, up to a limit of 1,000 million euros depending on the size of this operation.
"It is a sign of the strong commitment of the State with Air France, with its workers, and to guarantee the continuity of a strategic company for the French nation," said Le Maire.
The Dutch KLM, the other strategic subsidiary of the Air France-KLM group, will not benefit from the aid, which is guaranteed by the specific characteristics of the aid instruments, by the corporate and governance structure of the group and by the commitment to that the relations between Air France and its group, on the one hand, and KLM, on the other, will continue to be based on market conditions, reports Efe.
Support with conditions
The green light from Brussels does not constitute a carte blanche for either Paris or Air France.
"Public support will come with conditions, in particular to ensure that the French State receives sufficient remuneration, and other measures to limit distortions of competition," said the Executive Vice President of the European Commission, Margrethe Vestager, in a statement.
Specifically, said the head of Competition, Air France has committed to making slots available at the congested Paris Orly airport, where the company has an important market position.
"This gives competing airlines the opportunity to expand their activities at this airport, ensuring fair prices and a greater offer for European consumers," added Vestager.
The negotiation of the time slots has been, explained Le Maire, one of the "hard points" that has made the negotiations in Brussels to recapitalize the airline take so long.
The EU demanded in principle the concession of 24 slots, which have finally been reduced to 18. A figure, according to the head of the French Economy, "reasonable and proportionate" that represents 4% of Air France's slots in Orly.
In addition, the minister specified, Paris has succeeded in ensuring that the bands are transferred in turn with conditions: “We wanted the companies that recover those bands to strictly respect the social and fiscal rules of the French State, we did not want
social or fiscal
dumping
, because it would be unfair competition that could weaken Air France, "said Le Maire, who estimates that" at least "until 2024, European air traffic will not return to normal.
Air France is owned by the Air France-KLM group, which brings together the former French and Dutch flag airlines and in which the French State has a 14.3% stake.
With a fleet of more than 300 aircraft, Air France plays a "very important role in the French economy, in terms of employment and connectivity for many French regions, including overseas", the European Commission highlighted when reasoning its approval to the agreement.
In 2019, the airline group Air France-KLM reported an annual operating profit of approximately 750 million euros.
However, as a result of travel restrictions introduced by France and by many countries to limit the spread of the coronavirus, Air France and its group have suffered a significant reduction in their activities, leading to significant losses.
More information
AirFrance-KLM lost 7 billion euros in 2020, the worst year in its history
In fact, the announcement of the recapitalization is known on the same day that Air France reported that it foresees 1,300 million losses in the first quarter of 2021, although it expects, especially from the summer, a “significant recovery in demand. "Of flights, as long as, he specified in a statement," the positive effects of the acceleration of vaccination campaigns in several countries lead to fewer strong restrictions on passenger traffic in those countries.
In any case, said Air France-KLM Chairman Ben Smith, the agreement reached Tuesday to recapitalize the company will provide it with “more stability to move forward when the recovery begins” when world borders are reopened as vaccination against the coronavirus.
