Government Support For Air France-KLM Delayed

The Air France-KLM group is still waiting on additional government support after negotiations have reached a standstill. The group is set to report its annual financial results on February 18th, and it is looking unlikely that an agreement will have been achieved by the deadline.

Air France KLM Airbus
The Dutch and French governments are having a hard time agreeing on terms, which means Air France-KLM hasn’t received further support. Photo: Getty Images

The difficulties of having two governments invested in one group are starting to come to a head. The French and Dutch governments are having a hard time defining the terms of the support package for Air France-KLM. The sticking point appears to be how the loan is divided.

Stay informed: Sign up for our daily aviation news digest.

Taxpayer money

According to the Dutch media outlet the FD, the Dutch government only wants Dutch taxpayer money to support the KLM airline, not the group as a whole. The group is listed in Paris as a French company.

As with many airlines worldwide, the group suffered over the past year due to the massive drop in demand. At first, both the Dutch and French governments were keen to provide support to keep the group afloat. The Dutch government promised €3.4 billion ($4.1 billion), while the French promised €7 billion ($8.4 billion).

KLM 737 parked
The Dutch government doesn’t want to spend taxpayers’ money propping up the Paris-listed group and the French airline. Photo: Getty Images

The total initial loan amount of €10.4 billion ($12.5 billion) means the group isn’t in immediate danger, but it does require further support, which is where the negotiations have failed. The Dutch government is not happy spending more Dutch taxes on the French company, preferring instead to use the money to prop up KLM alone. Air France is the larger airline, but it is generally agreed that KLM is the more profitable of the two.

As well as only supporting KLM, the Dutch government appears to want to increase its control in the group as a whole. This shouldn’t be a problem except for the fact that the French government also wants to increase its control. Both sides currently own 14% of the group each. The French government is arguing that investing in the group will help KLM, while the Dutch want to distinguish between the two sides of the group.

Simple Flying reached out to both airlines for a comment on the situation. A representative for the group confirmed that,

On this topic, the Air France-KLM Group doesn’t make any comment.”

The beginning of the end

Clearly, coming to an agreement is the best option for everyone in this situation. The airlines’ operations are so intertwined that separating the two airlines would only be a last resort. However, key officials in the Dutch government have already said the group’s future is not guaranteed.

Air France KLM shares getty images
Many people have suggested that this is a sign the group should split. Photo: Getty Images

Although the comment is open to interpretation, many people have voiced opinions that this is the beginning of the end for the group. Both airlines are crucial in their respective countries, so it is unlikely the Dutch and French governments will let them collapse. However, we might be able to see the split of the group.

Of course, the two sides could reach an agreement that sees both governments increase their stake in the airline. But where the Dutch money will be spent is anyone’s guess right now. We’d love to know what you think.

Do you believe the group is about to split? Or will the two sides be able to reach an agreement? Let us know your thoughts in the comments.