The European Commission approved, on Tuesday 6 April, French plans to grant up to €4 billion in aid for the recapitalisation of Air France, which has been brought down by the pandemic and the collapse in passenger traffic. The support was authorised under the State aid Temporary Framework.
Margrethe Vestager, Executive Vice-President for competition policy, said that in return, Air France has committed to making slots available 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”.
A total of 18 slots per day will be transferred to other companies.
In addition, as part of this plan, the French state will be authorised to increase its shareholding in Air France to “just under 30%”, compared with 14.3% today, French Economy Minister Bruno Le Maire said on Tuesday.
The recapitalisation of Air France involves the conversion of the €3 billion State loan already granted by France into a hybrid capital instrument and a capital injection by the State via a capital increase opened to existing shareholders and the market, in a limit of one billion euros, the European Commission explained.
Conditions to be met. The capital injection by the French State “will not exceed the minimum needed to ensure the viability of Air France and its Holding company and will not go beyond restoring their capital positions compared to before the coronavirus outbreak”, the Commission also stressed.
The French State will receive an appropriate remuneration for the investment and additional mechanisms have been put in place to incentivise Air France and its Holding company to buy back the State’s equity participation obtained as a result of the recapitalisation.
The French State will also have to present a plan to reduce its shareholding. “Until 100% of the recapitalisation is redeemed , Air France and its Holding company are subject to bans on dividends”, the Commission warned.
The Commission has concluded that the recapitalisation measure will help to manage the economic impact of the pandemic in France: the measure aims to restore the balance sheet and liquidity position of Air France and its Holding company in the face of the exceptional circumstances caused by the pandemic while maintaining the necessary safeguards to limit distortions of competition. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107 of the Treaty and the conditions set out in the Temporary Framework.
KLM, the Dutch partner in the Air France-KLM group, will not benefit from the aid, according to the Commission.
Air France-KLM announced on Tuesday that it expects an operating loss of €1.3 billion in the first quarter of 2021. (Original version in French by Lionel Changeur)