The French state has reached an agreement with the European Commission allowing it to provide capital support to the national carrier Air France, whose finances are reeling under the impact of coronavirus restrictions.
A welcomed decision by the French Government; The European Union has approved $4.7 billion in government aid for Air France as the airline struggles through the economic impact of the COVID-19 pandemic.
In order to ensure that the state aid does not give the company an unfair advantage, in return for the aid, the carrier has agreed to make slots available to competitors at the Orly Airport in Paris. “The public support will come with strings attached,” said European Commission Vice President Margrethe Vestager.
“This is good news for Air France and good news for the French,” French Finance Minister Bruno Le Maire said on Tuesday. Air France will give up 18 takeoff and landing slots — about 4% of its slots — at Paris-Orly airport, he detailed.
Over the past year, Air France has received 3 billion euros in direct loans from the French state, which will be converted into bonds as part of a recapitalization of up to 4 billion euros ($4.7 billion). In exchange, the government set conditions of profitability and more environmentally sustainable, less polluting policies.
The French government currently holds 14.3% of shares in Air France. In acceptance of the state aid, the French state emerges as the biggest investor in the Air France-KLM airline alliance, with a stake of up to 29.9%.
The state aid comes after months of tough negotiations between shareholders in France and the Netherlands, and the European Commission, which has finally given its blessing. The financial support is aimed at giving the carrier some leverage as it confronts one of the worst crises to hit the airline industry.
France and the Netherlands both reaffirmed that they are not in view of nationalizing the group. The French state has said the aid was essential to save the national carrier as Air France-KLM expects an operating loss of about 1.3 billion euros ($1.5 billion) for the first quarter of 2021.
“These first recapitalization measures are an important milestone for our group in this exceptionally challenging period,” said Air France-KLM CEO Benjamin Smith in a statement. “They will provide Air France-KLM with greater stability to move forward when recovery starts, as large-scale vaccination progresses around the world and borders reopen.”
