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Air Travel

Air France-KLM secures billions in state aid

By Molly Dyson / 27 April 2020 / Contact Reporter
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Update 1 May: John Vandesquille, travel and tourism analyst at GlobalData, said the French government provided Air France-KLM a loan under the condition that the airline group does not compete with the country’s high-speed train services on journeys under 2.5 hours.

“Climate change and the subsequent necessary reduction of carbon emissions have been hot topics for years now, particularly in the travel industry, and airlines are often singled out for not doing enough to protect the environment.

“The aim of the French government when placing conditions on access to its rescue package is to reduce domestic flights lasting less than 90 minutes to the minimum, as they are the worst offenders in terms of carbon emissions.

“It is expected that other governments currently negotiating with airlines, such as the Austrian Conservative-Green coalition for instance, will follow suit by imposing similar measures. Indeed, they all have emission reduction objectives and now is the ideal time to force airlines to be more environmentally friendly as they possess very little leverage at the moment.”

Vandesquille added that the challenge for the French high-speed rail operator will now be “to offer competitive prices for high-speed travel as it is often considered too expensive for the quality of service offered. The measures taken by the government would otherwise be slightly counterproductive, with tourists opting for the less eco-friendly road travel instead.”


The Air France-KLM Group has reached an agreement with the French government on €7 billion in state-backed loans to survive the coronavirus crisis, while talks on another €2-€4 billion are ongoing with the Dutch government.

Earlier this month, the group said it could run into liquidity issues in the third quarter of 2020 due to a downturn in passenger numbers resulting from travel restrictions and cratering demand. It entered talks with the governments of its airlines’ respective home markets within the guidelines of the European Commission’s Temporary Framework on State Aid put into legislation in March.

The French government, which owns a 14 per cent stake in Air France-KLM, has agreed to guarantee up to 90 per cent of a €4 billion loan from a syndicate of six banks and will also provide a direct loan of €3 billion.

Separately, the Dutch government – which last year increased its stake in the group – has pledged to provide between €2 billion and €4 billion in state aid, with talks on conditions for the funding still ongoing.

Air France-KLM said the extra cash will allow it to develop a “transformation plan” that will include a review of Air France’s activities “looking to adapt to the new market reality brought about by the crisis”. As a result, the group’s board of directors will consider increasing the company’s equity capital, and the French government has indicated it could take the opportunity to look at its options for increasing its stake.

Anne-Marie Couderc, chair of the Air France-KLM board, said: “…I would like to thank the French state and our banking partners for this aid, which will enable the Air France-KLM Group to overcome this unprecedented crisis.”

Benjamin Smith, the group’s CEO, commented: “This aid, along with the group’s action plan, will enable us to withstand this crisis and foresee the future of Air France-KLM with ambition and determination.”

Speaking on the Dutch government’s commitment to provide support, KLM president and CEO Pieter Elbers added: “Air France and KLM are currently weathering a storm of unparalleled magnitude. The Dutch government has responded with aid on an equally unprecedented scale. The Netherlands can be assured of our total commitment to living up to the trust that has been placed in our company.”

The news comes as other European airlines continue to seek state aid, with Lufthansa reportedly appealing for €10 billion from the German government and Virgin Atlantic still in talks with the UK government for up to £500 million in commercial loans. 

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