Air France-KLM In Discussions Over Government Assistance

On Friday, Air France-KLM was reported to be in talks with banks to receive state-guaranteed loans. These bailout funds would be of utmost importance as the airlines hunker down for an unprecedented shutdown. 

Air France-KLM In Discussions Over Government Assistance
Air France-KLM is reportedly in talks over state-backed bailout packages. Photo: KLM

Up to €6 billion

According to Reuters, Air France-KLM is in talks with banks to receive up to €6 billion in loans guaranteed by the French and Dutch governments. According to sources, both governments are working to pump in “as much as they can.” Under the most likely scenario, Air France could get about €4 billion in French-guaranteed loans while KLM receives close to €2 billion backed by The Hague.

Setting grievances aside

The French and Dutch governments seem to be putting aside previous grievances arising from the Dutch state’s surprise acquisition of a 14% stake in Air France-KLM in February last year. They now appear to be joining forces in order to rescue their national carriers.

“We’ve been in discussions for a long period of time with KLM and Air France, and very specifically with the French state,” Dutch Finance Minister Wopke Hoekstra told Reuters. “It’s extremely important to help this vital company through these difficult times.”

The French government has already declared its intention to stand behind its national airline. A capital injection was already the most likely option, rather than an increase in shareholding, as this could have further exacerbated tensions with the Dutch. However, this is not to be ruled out.

Air France KLM shares getty images
Tensions have been high between the two governments over the management of Air France-KLM since last year. Photo: Getty Images

Could disentanglement be on the cards?

The two governments have been knocking heads over strategy and management of the airlines since the Netherlands resolutely went ahead and purchased a 14% share in the group at the beginning of last year. This matches the amount owned by France.

The Dutch government said it was to ensure that they would have a “seat at the table”, while the move prompted French President Emmanuel Macron to call on the Netherlands to “clarify its intentions.” 

KLM CEO Pieter Elbers said this week that they are not working on any disentanglement scenarios from its group partner airline. However, the French Minister for Transport, Jean-Baptiste Djebbari said as late as Sunday, that the nationalization of Air France was “one possibility among others that we are not ruling out.”

Air France, Domestic Flights, Carbon Neutral
The French government has said nationalization is one of the options they are looking into. Photo: Air France

Closer together or further apart?

Both airlines have slashed flights by 90% and have been working to reduce costs with government-supported temporary furloughing of staff. KLM will also be cutting 2,000 positions permanently.

Talks were already on the way for the potential sale of the Dutch government shares in Air France-KLM. If this crisis will bring the two state-owners closer together in the long run, or if it will exacerbate the feud further, remains to be seen.

How do you think this could potentially affect the long-term cooperation of the airlines? Let us know in the comments!