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.