EU approves €4 billion aid to Air France, with strings attached

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By Euronews  with AFP
Air France is to be bailed out by the French government
Air France is to be bailed out by the French government   -  Copyright  Francois Mori/Copyright 2020 The Associated Press. All rights reserved

The European Commission has approved a plan for France to provide up to €4 billion in aid to Air France, which has suffered from the collapse of passenger traffic due to the coronavirus pandemic.

The French state will increase its stake in the airline to “just under 30%”, French economy minister Bruno Le Maire announced on Tuesday, up from its current 14.3% holding.

As part of the deal, to ensure state aid isn’t giving the company an unfair advantage over its competitors, Air France will give slots at Paris Orly airport to competing airlines, EU Competition Commissioner Margrethe Vestager explained in a statement.

Other “strings attached” include bans on dividends, share buybacks and bonuses for executives, and a commitment to publish information on how the aid has been used, including how it supports obligations linked to the EU’s green and digital transformation.

Last year, Air France got €3 billion in direct loans from the French state as part of a recapitalisation of up to €4 billion.

The French government, the airline’s largest single shareholder, said it was essential to save the national carrier.

Margrethe Vestager, who is in charge of the Commission’s competition policy, said: “France will contribute up to €4 billion to reinforce Air France's equity and help the airline face financial difficulties resulting from the coronavirus outbreak. At the same time, the public support will come with strings attached, in particular to ensure the French state is sufficiently remunerated, and further measures to limit distortions of competition.

“In particular, Air France has committed to make available slots at the congested Paris Orly airport, where Air France holds significant market power. This gives competing carriers the chance to expand their activities at this airport, ensuring fair prices and increased choice for European consumers.”

The capital injection from the French state "will not exceed the minimum necessary to guarantee the viability of Air France and its holding company and to restore its capital position before the COVID-19 pandemic," the EU said.

France will also have to present a plan to the Commission on reducing its shareholding 12 months after the aid is granted, “unless the State's intervention is reduced below the level of 25% of equity by then.”

KLM, the Dutch partner in the Air France-KLM group, will not benefit from the aid, the Commission said.

Air France-KLM announced on Tuesday that it expects to make an operating loss of €1.3 billion in the first quarter of 2021.

Its chief executive Benjamin Smith said the state aid would give it "greater stability to move forward when the recovery begins".

The company said it had "strong liquidity and credit lines of €8.8 billion as at 28 February 2021", and still expects "a significant recovery in demand" this year.