Air France-KLM secures € 10 billion bailout as coronavirus hits travel

PARIS – France and the Netherlands will provide an unprecedented taxpayer-funded bailout of 10 billion euros, around 10.8 billion dollars, to save Air France-KLM as the fallout from the coronavirus on the airline industry travel takes a devastating toll on global air carriers.

Air France-KLM, one of the largest European airlines, will receive a bank loan of 4 billion euros backed by the French state and a direct government loan of 3 billion euros, Bruno Le announced on Friday evening. Mayor, French Minister of Finance. The Dutch government has announced that it will provide an additional € 2 billion to € 4 billion in public aid.

The injection of aid fails to nationalize the company, in which the French and Dutch states each hold 14 per cent of the shares. The European Commission – the executive arm of the European Union, which has lifted restrictions on state support amid deep economic recession – quickly approved the bailout.

This is the third multibillion-euro lifeline extended last week by the French government to companies battered by the coronavirus.

The government is working on a € 5 billion state-guaranteed loan program for French automaker Renault, Le Maire said on Friday. Sales of Renault – which is part of the world’s largest automotive alliance, along with Nissan and Mitsubishi Motors – have been hammered after dealerships and factories across Europe were quarantined. The company had already reported in recent months that the arrest and subsequent escape of its former president, Carlos Ghosn, who came from Japan in January, wreaked havoc in the group.

The state also last week supported a loan of 500 million euros to the French electronic distribution giant FNAC-Darty, which employs tens of thousands of people in France, to help it secure its cash flow and get prepare for recovery from the pandemic.

Since the start of the crisis, the French government has supported more than 20 billion euros in loans to 150,000 companies, as part of a huge tax package to support the economy and limit mass unemployment until businesses can safely resume operations. The French economy is expected to contract by at least 8% this year, most brutal fall since the end of World War II.

Few industries have suffered as hard as the airlines, as worldwide travel bans cripple fleets. The International Air Transport Association warned this week that European airlines would see demand drop 55% in 2020 compared to 2019, with a total potential of $ 89 billion.

Flights across Europe have fallen 90% and most carriers don’t expect service to resume until June. The deployment of air traffic may depend on the introduction of government-mandated social distancing measures inside planes, the air transport association said.

The Trump administration made a deal with major U.S. airlines this month on the terms of a $ 25 billion bailout to help companies pay flight attendants, pilots and other employees.

Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines will participate in the bailout, which is part of an economic stabilization plan that Congress has adopted last month.

European airlines were hit earlier than in the United States, after President Trump on March 12 close America’s borders to most European travelers. While the travel ban has helped slow the spread of the outbreak in the United States, European carriers have struggled to cope.

German airline Lufthansa said on Thursday it would need government bailouts after slump in sales that resulted in a loss of more than € 1 billion in the first quarter, and investors are no longer willing to lend money. money to society. Passenger traffic has fallen to almost nothing, and the second quarter will be even worse, Lufthansa said in a statement.

Norwegian Air is seeking creditors’ support for a bailout that would convert up to $ 4.3 billion in debt into equity and raise new capital after announcing last month the temporary layoff of 7,300 employees, or around 90% of its manpower, and requested the help of the Norwegian government. .

Air France, in which the government has a 14% stake, has put its employees on part-time paid leave for six months, complying with a government demand not to lay off workers. The carrier has lost around € 25m a day since then, pushing him into critical financial straits.

With nearly all of the company’s planes grounded, the financial lifeline is needed “to save the 350,000 direct and indirect jobs that come with it,” said Mayor Maire.

Air France-KLM Chief Executive Officer Ben Smith, tell the pilots this month during a videoconference that it would probably take two years to regain the level of traffic seen in 2019. The carrier, which hopes to gradually restore flights over the summer, recently warned that in the if no tickets were sold, he would urgently need cash. during the July-September quarter to stay afloat.

In a declaration, the finance ministers of France and the Netherlands said they would take “all necessary measures” to help the carrier “to overcome this serious pandemic crisis”. The government business loans and new money are aimed at preserving the financial and operational condition of the carrier, they said.

The support “is not a blank check,” Le Maire said on Friday, adding that governments had set conditions for the carrier to be profitable.

“It is the money of the French, so the company has to make an effort to be more profitable,” he said. The company will also have to become “the most environmentally friendly company on the planet,” he added.

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