French Government Prepared To Offer Air France Financial Aid

Today, the French government has signaled it is ready to step in a provide Air France with financial aid as the airline struggles to deal with the impact of coronavirus. The support comes as the government confirms it is also in talks with the Dutch government regarding shares in the Air France-KLM group.

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The French Government has said it will provide financial aid to Air France as it struggles amid the coronavirus outbreak. Photo: Getty

Financial help

France is the latest government to agree to provide financial help to its airlines amidst the ongoing virus outbreak. The aviation industry has been hit the hardest financially as travel restrictions increase and demand plummets.

China has previously said it will provide financial incentives for any airline willing to fly to mainland China. Indonesia has also put money aside to aid its struggling airlines. France has now joined the growing list of states which will provide aid for its flag carrier amid the coronavirus outbreak.

Although no details of what this help may actually entail have been revealed, Finance Minister Bruno Le Maire confirmed he had spoken with Air France-KLM chief executive Ben Smith. He said that aid would be forthcoming but did not elaborate.

Air France’s problems

The most recent addition to the airline’s problems is President Trump’s ban on all air traffic between mainland Europe and the US. Air France is estimated to have cancelled almost 4,000 flights throughout the month of March. KLM is also expected to make similar levels of cuts over the coming months as traffic to Asia and to America grinds to a halt.

The airline’s shares have more than halved in the past month as the virus forces airline’s around the world to shut down. But the effect of the virus is far-reaching. Air France has said it is considering cutting over 1,000 jobs due to the financial impact of the virus. Hopefully, the financial aid from the government will ensure that these jobs are saved.

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President Trump’s decision to ban flights between Europe and the US will have a big impact on airlines. Photo: Getty Images

Air France has also cancelled all flights to Italy until the start of April. But restrictions are set to get even tighter. French local elections are being held on Sunday so the government is keen to keep people mobile. However, next week there may be more restrictions placed on travellers after the elections are over. The airline has already cut its domestic capacity by 17%.

The Dutch government

Not only is the French government in the process of providing financial aid to the airline, but they are also in talks with the Dutch government for them to sell their shares in the Air France-KLM group. Currently, the Dutch government owns 14% of the group and 6% of KLM. The shares bought in February this year were seen as an unfriendly move by the French who are now requesting the situation is changed.

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It is unknown if the French Government’s aid will extend to sister airlines KLM. Photo: Getty Images

The French Government’s offer of aid may be a way of showing the Dutch government that it is capable of looking after the group without their support. KLM is generally the more profitable of the two airlines so may require less aid. So far, the Dutch Government has not said if it will provide help to the group.

All European airlines are struggling under the continued pressure of the virus. Both governments will need to come together to save the airlines, not argue about shares. It will be interesting to see if the Dutch government offers a similar level of aid.