Paris considers loan to keep Air France-KLM flying
Airlines are scrambling to shore up finances as travel bans and coronavirus fears hit bookings
The French government is preparing to come to the aid of Air-France KLM, which has been hit hard by the coronavirus and Donald Trump’s travel ban.
France is studying how best to support the carrier, which is 14.3 per cent state-owned, with senior finance ministry officials saying they were considering loans rather than increasing their shareholding.
The government has already said it would stand behind the airline, which was formed by the merger of Air France and KLM of the Netherlands in 2004.
Bruno Le Maire, the French finance minister, said on Friday that France would “help all companies in which the state has a stake . . . Whatever it costs we will be at their side.”
After Air France-KLM chief executive Ben Smith and Mr Le Maire spoke on Friday, rumours swirled in the French press that the state was considering a capital injection. And while those rumours were swiftly denied by the finance ministry on Saturday, officials said such an injection remained an option if the situation deteriorated further.
Any increase in shareholding by the French state would risk increasing tensions with the Dutch government, which last year increased its shareholding to 14 per cent — roughly matching that of the French state’s — in order to protect its national interests.
The move to support Air France-KLM comes as airline chiefs around the world scramble to shore up their businesses as cancellations spike due to the virus and following US president Donald Trump’s move to block most travel by Europeans to the US.
The boss of British Airways said in a memo to staff this week that the current crisis is more serious than “the global financial crisis, the Sars outbreak and 9/11”. It is “a crisis of global proportions like no other we have known,” he added.
In a video to staff, Mr Smith, who is credited with starting to turnround Air France-KLM since taking over in 2018, said the company faced an “unprecedented situation” and was preparing a crisis plan.
Although they gained over 12 per cent on Friday, Air France-KLM shares have lost almost 50 per cent in the past month.
Air France-KLM declined to comment on the government’s plans but had said on Friday that it had drawn down €1.1bn of its revolving credit facility to “limit the impact of the virus on its profitability and preserve its financial flexibility”. Its total liquidity now stands at €5.5bn.
“The European airline industry is ripe for consolidation,” said Stephen Furlong, an aviation analyst with Davy. “I’d say Air France-KLM is a survivor in part because there is obviously quasi-government backing.”