EC backs up to €4bn French scheme to reinforce Air France's equity

The carrier suffered a significant reduction of its activities, due to the Covid-19 restrictions

Photo: EU

The Commission has approved on Tuesday French plans to grant up to €4bn for the recapitalisation of Air France through its Holding company. The measure was approved under the State aid Temporary Framework.

France will contribute up to €4bn to reinforce Air France's equity and help the airline face financial difficulties resulting from the coronavirus outbreak, said Executive Vice-President Margrethe Vestager, in charge of competition policy, noting that at the same time, the public support will come with strings attached, in particular to ensure the French state is sufficiently remunerated, and further measures to limit distortions of competition.

She explained as well that Air France has committed to make available slots at the congested Paris Orly airport, where Air France hold 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,” EVP Vastager pointed out.

Air France is a major network airline operating in France. It is owned by the Air France-KLM Holding company, in which the French state holds a 14.3% participation. With a fleet of over 300 planes, Air France plays a very important role in the French economy, in terms of employment and connectivity for many French regions including those overseas (Départements et Régions d'outre-mer “DOM-TOM”).

In 2019, the Air France-KLM airline group reported an annual operating profit of approximately €750m. However, as a result of the travel restrictions introduced by France and by many destination countries to limit the spread of the coronavirus, Air France and its Holding company have suffered a significant reduction of their activities, leading to major operating losses.

In this context, France notified to the Commission under the Temporary Framework a recapitalisation of up to €4bn of Air France and its Holding company. The recapitalisation by France, which is part of the first step of the recapitalisation plan of the group, comprises the conversion of the €3bn State loan already granted by France (approved by the Commission in May 2020 under case number SA.57082) into a hybrid capital instrument.

It also includes a capital injection by the State, through the subscription of new shares in a share capital increase opened to existing shareholders and the market, in a limit of €1bn depending on the size of this operation.

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