Picture: REUTERS/REGIS DUVIGNAU
Picture: REUTERS/REGIS DUVIGNAU

Paris — Air France-KLM is poised to get a fresh government bailout after burning through €2.1bn in the final quarter of 2020 as a resurgent Covid-19 pandemic delayed any recovery in air travel.

Talks are ongoing between the carrier’s biggest shareholders, the French and Dutch governments, and the European Commission about a rescue package, according to CFO Frédéric Gagey. Air France-KLM reported on Thursday it had €9.8bn of liquidity and credit lines at its disposal at the end of 2020 compared with €12.4bn three months earlier.

“It’s a question of days or weeks, not months,” Gagey said on a conference call when asked about the timing of the recapitalisation plan. “We aren’t in a situation that is too difficult, we still have time. There is no urgency.”

The airline’s cash outflow jumped from €1.2bn in the three months to end-September after governments imposed lockdowns in a bid to curb a new wave of coronavirus cases. The carrier painted a grim outlook for this quarter, saying it will operate at 40% of 2019 capacity and expects losses to worsen.

The stock declined almost 1% in early trade in Paris, after more than halving over the past 12 months.

France and the Netherlands have been in talks for months on a fresh bailout for Air France-KLM after the €10.4bn in loans and guarantees granted 2020. Both states have signaled their intention to support the carrier, while opposing European Commission demands that it relinquish airport slots in exchange for additional aid.

While Gagey declined to comment specifically about any remedies that could be asked of the airline by the commission, he acknowledged landing rights at Paris-Orly airport are among the issues on the negotiating table.

“There can’t be elements that the group finds too negative for the future of its strategy,” he said. Comparisons with the slots rival Deutsche Lufthansa had to relinquish to get state funding “are complicated”.

The carrier plans to raise “equity and quasi-equity”, Gagey said, though the precise instruments for the operation are still under consideration.

Dutch elections

While the airline aims to have an agreement by May, a decision is only expected to be made after the Dutch elections on March 17. Looking further ahead, Air France-KLM said it plans to ramp up capacity towards the northern hemisphere summer and expects recovery in the second and third quarter thanks to the deployment of vaccines.

Air France-KLM has cut jobs and grounded planes in recent months in a bid to reduce costs. The Dutch arm last month unveiled a plan to eliminate 1,000 positions on top of the 5,000 shed in 2020, while Air France’s staff cutbacks to 2022 include the equivalent of 8,500 workers.

A bright spot has continued to be an increase in demand for cargo, which generated a 59% increase in fourth-quarter revenue to €764m. Lower capacity worldwide due to the grounding of fleets has meant an increase in freight prices, Gagey said.

Earnings highlights:

  • Fourth-quarter revenue at €2.36bn, down 64% compared with 2019.
  • Net debt was €11.0bn at year-end, up €4.9bn in 12 months.
  • Fourth-quarter loss before interest, taxes, depreciation and amortisation of €407m vs estimate €638.7m.
  • Net quarterly loss €1bn vs €155m profit.

Bloomberg

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