The Future Of Air France-KLM Is Uncertain

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The survival of Air France-KLM is ‘not guaranteed,’ at least that’s what the Finance Minister of the Netherlands is saying. The government official made the remarks on Sunday in an interview with Dutch television. These comments come despite billions in government bailout loans provided to both Air France and KLM by their respective national governments.

With such longstanding histories and their crucial roles in their national economies, it’s difficult to imagine Air France and KLM not surviving this crisis. Photo: KLM

Survival not ‘guaranteed’

Dutch Finance Minister Wopke Hoekstra sat down for an interview with Dutch Television on Sunday. He reflected on the state of the nation’s carrier, KLM, and its French counterpart, Air France.

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When speaking about the survival of the airline group, he remarked, “Dat is geen automatisme” – which has been translated by most outlets to mean “it is not guaranteed.”  However, it can also be translated to “it is not automatic.” The difference between the two words leaves Hoekstra’s statement slightly open to interpretation.

It helps further to look at the statement in context, as he says the following afterward as published by the Irish Examiner:

“They will have to address their cost bases even as things stand now. And suppose this situation lasts until the end of next year, then they will have to cut even deeper,” 

KLM grounding
KLM is parking more than 200 planes at Schiphol. Photo: Getty Images

Air France-KLM has already received billions

The French and Dutch governments, which each own 14% of the group, have already injected billions of euros into their respective national airlines to ensure the businesses survive. In fact, when combined, the government loans amount to over €10 billion – or $11.85 billion.

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At the end of June, Dutch flag-carrier KLM announced that it had secured €3.4 billion ($3.8 billion) in funding to see it through the COVID-19 crisis. The deal, achieved following an agreement between the Dutch Government and France, comes with far-reaching conditions.

“The financing package is necessary to secure the long and difficult road of recovery in the coming period. This is a very important step and I express my gratitude on behalf of all KLM colleagues to the Dutch state and the banks for their confidence in our organisation and our future,” – Pieter Elbers, CEO, KLM

Air France grounded planes
Air France must abide by some conditions in order to obtain its government bailout loan. Photo: Getty Images

In June, it was confirmed that Air France would receive €7 billion ($8.08 billion) from the French Government. Like the Dutch, the French Government has also applied some environmental conditions to its bailout money. This will include a shift to alternative fuels and a reduction in domestic flights – both of which will help the overall goal of reducing carbon emissions.

Analysis of the situation

While it’s clear that both Air France and KLM are in poor financial shape right now, it is incredibly difficult to believe that survival isn’t actually guaranteed.

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Both Air France and KLM have rich histories and were some of the world’s first airlines. Even just for the sake of national pride, both the French and Dutch Governments would take action to keep these airlines operating.

KLM route to Batavia
KLM is the world’s oldest airline operating under the same name. Image: KLM

Of course, it’s more than just symbolism and history. The two carriers are critical to the economies of their respective nations, transporting tons of valuable goods to the world every single day.

If we re-approach Minister Hoekstra’s statement about survival with his subsequent comments in mind, we could interpret it to mean something more like ‘The survival of Air France-KLM is not automatic, it will take deep cuts and hard work to achieve.’ That’s our interpretation, but we’d love to know how you see the situation.

Do you think these remarks are hyperbole or were taken out of context? Or is Air France-KLM really at risk of collapse? Let us know your thoughts in the comments.

Simple Flying had reached out to representatives at both Air France and KLM requesting comment or statement in response to Minister Hukstra’s remarks. Air France’s spokesperson informed us that “the Air France-KLM Group doesn’t make any comment on this topic.” KLM responded by merely including a link to their bailout announcement from June.

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