Air France-KLM Set to Unveil Debt Plan After Board Approval

(Bloomberg) -- The board of Air France-KLM approved an aid package aimed at strengthening the indebted carrier’s balance sheet, according to people familiar with the matter.

The plan will be unveiled early Tuesday, said the people, who asked not to be named because the information isn’t public. The funding includes the conversion of government loans into hybrid bonds and raising fresh equity, one of the people said.

A spokeswoman for the company declined to comment.

The French government and the European Commission earlier reached agreement on fresh support for the carrier, which has been hurt by a drop in air travel since the start of the pandemic. France and the Netherlands -- Air France-KLM’s biggest shareholders with a combined 28% stake -- granted the company 10.4 billion euros ($12.3 billion) in direct loans and state guarantees last year.

The governments have been working on a new package to alleviate the carrier’s debtload. The commission has sought concessions to allow more competition, as it had for rival Deutsche Lufthansa AG’s rescue.

French Finance Minister Bruno Le Maire on Sunday said long and difficult negotiations with EU Competition Commissioner Margrethe Vestager had led to a “fair and proportionate” deal for the Air France arm.

The carrier would have to give up fewer than the 24 daily airport takeoff and landing slots at Paris-Orly airport the Commission had initially proposed in return for the state support, he said.

Air France-KLM’s net debt ballooned to 11 billion euros at the end of 2020 and it has long flagged a plan to seek equity and quasi-equity.

While Le Maire said the French government considers the carrier to be strategic for the country, it needs to improve competitiveness, reduce carbon emissions and return to profit. This didn’t necessarily mean cutting jobs, he said.

Air France-KLM burnt through 2.1 billion euros in the final quarter of last year. The airline said in February it would operate at 40% of 2019 capacity in the first quarter and that losses would worsen. It is banking on the rollout of vaccines to underpin a recovery in the coming months.

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