The European Commission announced on Monday 4 May that it had approved the French government's €7 billion aid plan for Air France.
The measures were approved under the Temporary Framework for State Aid adopted by the Commission on 19 March 2020, as amended on 3 April 2020, and directly based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU).
The plan is made up of €4 billion of loans 90% guaranteed by the French State, and direct loans of €3 billion.
“This €7 billion French guarantee and shareholder loan will provide Air France with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak”, said Margrethe Vestager, the Commission Vice-President responsible for Competition Policy. She added that “France has also announced plans for certain green policy choices as regards Air France. Good. Member States are free to design measures in line with their policy objectives and EU rules”.
50% reduction in CO2 emissions. In granting this aid to Air France, the French government, which has a 14.3% shareholding in Air France-KLM, laid down specific environmental conditions.
Bruno Le Maire, the French Minister of the Economy, indicated last week that Air France’s target was to reduce its CO2 emissions on domestic flights by 50% by the end of 2024. “Once there is a rail alternative to domestic flights that last less than two-and-a-half hours, domestic flights will have to be drastically reduced and restricted to hub transfers” said the minister.
The Commission assessed the subordinated shareholder loan under EU state aid rules, particularly Article 107(3)(b) TFEU, which enables the Commission to approve state aid measures implemented by Member States to remedy a serious disturbance to their economy.
The Commission is currently in the process of expanding the Temporary Framework to set horizontal conditions for the assessment of subordinated loans (see EUROPE 12475/4).
The Commission found that, in the absence of the public support, Air France would probably be facing the risk of bankruptcy because of the sudden erosion of its business. This would be likely to cause severe harm to the French economy.
Air France-KLM, Air France’s parent company, is also in discussions with the Dutch government about the possibility of KLM obtaining between €2 billion and €4 billion in support.
The air travel group also intends to consider a plan to strengthen its capital base, which the government could be involved in. (Original version in French by Lionel Changeur)