France Vows Swift Help to Stem Air France-KLM Cash Crunch
French Finance Minister Bruno Le Maire vowed to provide strong backing for Air France-KLM after the troubled carrier said it could run out of cash in the third quarter.
“We’re ready to step in and support Air France when the time comes, no doubt very soon,” Le Maire said Friday on Europe 1 radio, adding that the company is a French industrial jewel and symbol for the nation.
The carrier warned on Thursday that without additional financing, it would need to raise liquidity in the three months through September, despite drastic cost-cutting measures including a slashing of planned investment and the early retirement of portions of its fleet.
Air France-KLM and its French and Dutch arms “are holding in-depth discussions with their respective governments and financial institutions,” according to a statement. The company is “confident” of being able to get more financing.
The airline industry has been slammed by the spread of Covid-19 across continents as the epicenter moved from China at the start of the year to European countries including Italy, Spain and France and then took hold in the Americas. Air France-KLM still expects less than 10% of its flight activity during the next few months compared with last year.
The French government has singled out the carrier as a priority for state help in recent weeks, promising “massive support” that could come in the form of state-backed loans worth about 6 billion euros.
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In April and May, Air France-KLM has said it aims to continue serving only some key city pairs with a “skeleton operation.” Beyond that time frame, projections are too difficult to provide, it said.
On Thursday, the airline gave details about steps being taken to shore up liquidity:
- Cost cuts of about 500 million euros in 2020
- Lowering capital spending by 700 million euros
- Talks with lessors, airports to defer payments
- Seeking tax, social-charge payment delays
The French government, which along with the Netherlands owns a stake in Air France-KLM, has vowed to prop up the former flag carrier and said it’ll work with the Dutch -- a sign of cooperation that would come after a bitter spat.
The Dutch state’s stealth purchase last year of a stake was aimed at matching the one held by France. The move infuriated the French government and fueled suspicion between the two sides.
The unprecedented near-total shutdown of travel in regions like Europe has hit airlines hard. About 70% of world carrier capacity is idled even as flights within the U.S. continue and Chinese domestic services return, according to the International Air Transport Association. Jets are parked on tarmacs across airports in Europe, where more than 90% of operations have halted.
©2020 Bloomberg L.P.