France And EU Move Closer To Deal On Air France-KLM Aid Package

The financial impacts of the ongoing coronavirus pandemic have hurt even the largest airlines. While many carriers have had the resources to supplement their income by operating additional cargo flights, this hasn’t alleviated the need for government assistance. Air France-KLM is just one group that has required such help. As such, the French government is said to be closing in on securing a deal with the European Commission to provide further aid.

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Air France-KLM also received government financial aid last year. Photo: Vincenzo Pace | Simple Flying

Further aid edges closer

The Air France-KLM Group has been awaiting additional government support for quite some time. Indeed, as long ago as January, Simple Flying reported that negotiations between the airlines and their respective countries’ governments had come to a standstill.

However, now, a breakthrough finally appears to have been made. According to Reuters, France’s Finance Minister Bruno Le Maire has confirmed that the French government has come to an agreement with the European Commission regarding such support. He stated:

It has been a long and difficult negotiation but I think we have reached a good deal with Margrethe Vestager [European Commissioner for Competition].

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Air France, Safety Video, French Landmarks
The French government is closing in on securing approval from the European Commission for its latest aid package for Air France-KLM. Photo: Vincenzo Pace – Simple Flying

Le Maire did not disclose the amount of money involved in the deal. However, he did confirm that Air France had given up some of its slots at Paris Orly as part of the negotiations, albeit not as many (24) as Brussels requested. Reuters believes that the package may entail converting a €3 billion ($3.5 billion) French government loan to hybrid instruments.

In need of support after heavy losses

The need to strengthen Air France-KLM balance sheets has arisen following the group’s declaration of a €7.1 billion ($8.5billion) loss last year. Of course, Air France and KLM were not the only carriers to have experienced financial difficulties in 2020.

Indeed, the coronavirus pandemic heavily impacted nearly every facet of commercial aviation. Nonetheless, this enormous figure served as a stark reminder that even the largest airline groups were not immune from what was an unprecedented year. The Dutch Finance Minister even went as far as to say that the group’s future was uncertain last September.

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Even as recently as September, the Dutch Finance Minister asserted that the Air France-KLM Group’s future was not guaranteed. Photo: Vincenzo Pace | Simple Flying

Extensive aid already given last year

The aid package that Air France-KLM is currently edging towards is not the first one that it will have received since the present crisis began. Indeed, talks regarding such financial aid began as early as last April, as airlines scrambled for state-guaranteed loans to cover for the heavy and unexpected losses faced during the early months of the pandemic.

By the end of April 2020, Air France-KLM had managed to come to terms with banking institutions and the French government to agree on this support. The European Commission eventually signed off on this aid package, which totaled €7 billion ($7.7 billion), the following month. A mix of bank and shareholder loans provided this liquidity.

What do you make of the proposed aid package for the Air France-KLM group? Let us know your thoughts in the comments.

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