Air France close to securing more state aid

France and the Netherlands have been in talks for months on follow-on funding plan after granting €10.4bn last year

The airline, which had net debt of €11bn at the end of last year, said it’s planning to raise equity and quasi-equity. Reuters

The French government is close to finalising a recapitalisation plan for Air France after addressing some antitrust concerns raised by the European Commission, according to sources.

The multi-billion-euro package could be announced in coming days following final approval from Brussels and the board of parent Air France-KLM.

A spokeswoman for Air France declined to comment, as did the government. The European Commission said it’s in discussion with French authorities and “won’t prejudge the timing or outcome of these contacts”.

France and the Netherlands, which own a combined 28 per cent stake in Air France-KLM, have been in talks for months on follow-on funding plan after granting the group €10.4 billion($12.3bn) in direct loans and state-backed guarantees last year.

The carrier, which had net debt of €11bn at the end of last year, has said it’s planning to raise equity and quasi-equity.

France has said it plans to provide support to the French brand, while seeking to soften Commission demands for measures aimed at boosting competition, including the surrender of coveted landing rights at Paris-Orly and Amsterdam Schiphol airports. The Netherlands has also pledged aid.

As part of its state-aid deal last year, Deutsche Lufthansa agreed to hand 24 slots a day in Munich and Frankfurt to rivals, according to an EU document. Les Echos reported Thursday that Air France will need to give up fewer positions at Orly, together with some at its main Paris Charles de Gaulle hub.

Lufthansa’s deal also stipulates that it can’t acquire a stake of more than 10 per cent in an operator in the same line of business until at least 75 per cent of the aid is repaid. Dividends, share buybacks and executive pay are also curtailed.

Air France-KLM last month reported an increase in cash burn in the last three months of 2020. Chief financial officer Frederic Gagey said a recapitalisation was due within days or weeks.