Air France Forced To Give Up Some Paris-Orly Slots In New Refinancing Deal

French national flag carrier Air France will be forced to give up slots at Paris Orly Airport (ORY) if it wants to receive more financial aid from the French government. Over the weekend, the French government announced that it had reached an agreement with the European Commission to inject more cash into the struggling airline.

Picture taken of Air France's planes Getty
Air France will have to give up Paris Orly landing slots to receive state aid. Photo: Getty Images

The French government and the European Union’s agreement comes after weeks of negotiations to ensure that state aid does not give companies an unfair advantage. On Sunday, while speaking on the RTL/LCI/Le Figaro political broadcast “Le Grand Jury,” France 24 quotes French Finance Minister Bruno Le Maire as saying,

“We have an outline agreement with European Commissioner Margrethe Vestager about new financial aid for Air France.”

The government owns 14.3% of Air France

Like other airlines worldwide, Air France is struggling financially due to the impact COVID-19 has had on air travel. In exchange for the state aid, Air France will be required to give up slots at Orly Airport if it wants the green light from Brussels.

For Air France, giving up slots at Paris Orly Airport as a major setback as it is closer to the city center than Paris-Charles de Gaulle (CDG). Orly is also a crucial airport in the airlines’ plan to grow its low-cost subsidiary, Transavia.

Air France Transavia Getty Images
Orly is an important airport for Air France’s low-cost arm Transavia. Photo: Getty Images

Air France, of which the government owns 14.3%, posted a 7.1 billion euro loss ($8.4 billion) loss in 2020 because of the pandemic.

When asked how much state aid Air France would receive, the Finance Minister dodged the question saying that discussions were still ongoing with the airline. When asked about the deal struck with the European Commission, Le Marie described it as Being:

“Very good news for Air France and the whole French aviation sector,” adding that negotiations had been “tough.”

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Less than 24 slots

When questioned about how many slots Air France would have to give up at Orly, Le Marie would not give an exact figure but said it was less than the 24 the Commission had wanted.

While not putting a figure on the amount of aid, Le Marie said that the government had already given Air France assistance and that they were not about to sign a blank check. In May of last year, the European Union’s competition watchdog approved French state aid worth 7 billion euros ($7.66 billion) for Air France.

Air France Paris Orly
Air France doesn’t want to lose its foothold in Orly. Photo: Getty Images

“There are tens of thousands of jobs involved. Air France is strategic for our country,” he said, noting that the carrier must become more competitive and continue to reduce CO2 emissions.

“The taxpayer is making an effort, and Air France must also make an effort.”

According to European Union rules, any company that receives more than 250 million euros in state aid has to propose other measures to help safeguard competition.

Ryanair will not be happy

In a statement released before Sunday’s agreement between the European Commission and the French government, a Ryanair spokesperson said:

“The EU must put an end to this flood of discriminatory multi-billion euro bailouts to inefficient legacy airlines which will distort the Single European market and eliminate fair and effective competition.

“Commissioner Vestager must stand firm in her discussions with the French Government. Either Air France gets no State aid, or proper remedies should be put in place to ensure a fair and level playing field for all airlines. This must include Air France giving up capacity at key French airports. The 24 daily slots at Paris Orly referenced in some media reports is not enough, and the Commission must go further.

“Ryanair is ready to provide the competition, choice, and low-cost travel that French consumers/visitors deserve.”

Ryanair makes a good point and is sure to have an opinion on this latest state aid and the number of slots Air France has had to give up.

Lufthansa tails getty images
Lufthansa had to give up 24 slots to secure state aid. Photo: Getty Images

Last year when German national flag carrier Lufthansa received state aid, they had to give up 24 landing slots divided between Frankfurt and Munich. Why Air France did not have to give up a similar number will surely be questioned.

What do you think about Air France getting more state aid? Please tell us your thoughts in the comments.

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