Europe’s biggest airline bailout is set to escalate as Air France-KLM targets up to € 6bn (£ 5.3bn) in new funds to weather the pandemic of Covid.

The French and Dutch governments plan to provide support to the ailing carrier by the end of the year, sources say.

Air France-KLM shares fell more than 6% on Wednesday after The world first reported the story.

The loss-making airline is in talks to receive a capital injection of € 3 billion from France and € 1 billion from the Netherlands, the newspaper reported. The plan would aim to maintain the existing balance between the shareholder and to avoid nationalization.

“There is no rush, but we cannot wait until the end of 2021,” said Dutch Finance Minister Wopke Hoekstra. “It will be a discussion for the next few months or six months.”

France’s finance ministry said Air France “does not need short-term liquidity” and the two countries are considering how best to make the company’s balance sheet strong enough.

An Air France-KLM spokeswoman declined to comment.

The funding would come on top of a € 10.4 billion government bailout earlier this year. The money helped the airline get through the initial shock of the global pandemic that wiped out planes around the world and put airlines on the cheap.

However, the aid has taken the form of direct loans and guarantees that have left Air France-KLM with too much debt and operations that have yet to recover amid the resurgence of the virus.

The new funds could come in two stages, with the airline raising an additional € 2 billion in capital markets in the first quarter of next year, according to The world. The operation could include the issuance of so-called “hybrid” loans.

Structuring the package to avoid nationalization will be essential given that France and the Netherlands each hold a 14% stake. It is not clear whether any of the existing bailout loans would be converted to equity.

French Transport Minister Jean-Baptiste Djebbari said last month the talks would raise fundamental questions about how Air France-KLM, created in a merger over 15 years ago, is structured and supported by both countries.

The Dutch government last month approved its share of € 3.4 billion of the first bailout after a confrontation with KLM pilots over wages.

French Finance Minister Bruno Le Maire said the state could provide more aid, but nationalization was not the right solution.

Air France-KLM is seen as a matter of national sovereignty for the French government, which has pledged to devote more public funds to the carrier to help it survive.

The carrier, which employs around 90,000 people, has enough cash on hand for the short term, chief executive Ben Smith told Les Echos earlier this month.

Air France has accelerated a job-cutting plan to include the equivalent of 8,500 jobs by 2022, while KLM plans to eliminate up to 5,000 workers this year.

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Source: www.telegraph.co.uk
This notice was published: 2020-11-18 11:34:32