The European Commission has approved the French government’s
decision to provide Air France-KLM with €7 billion worth of loan guarantees and
a shareholder loan to help the airline group survive the financial impact of
the coronavirus pandemic.
According to the Commission, the loans were approved under
the Temporary Framework for governments to provide state aid to their country’s
struggling companies. Under normal regulations, no EU member is allowed to give
money to one company over its competitors within the bloc, but the EU decided
to relax the rules in March as the coronavirus began to spread across the world.
European Commission executive vice president Margrethe
Vestager, who is in charge of competition policy, said: “The aviation industry
is important in terms of jobs and connectivity. In the context of the
coronavirus outbreak, Air France has also been playing an essential role in the
repatriation of citizens and for the transport of medical equipment. 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.”
The Commission went on to say that its assessment of the
situation found Air France “would likely face the risk of bankruptcy” without
public support, and that its collapse “would likely cause severe harm to the
French economy”.
Air France-KLM is also in discussions with the Dutch
government, which is considering guarantees for between €2 billion and €4
billion of loans.
The French bailout has been criticised by Ryanair as
contravening state aid rules, with CEO Michael O’Leary threatening to lodge a
complaint in EU courts.