Air France-KLM eyes more funds after €4bn rescue
Paris — Air France-KLM CEO Benjamin Smith indicated the struggling airline could seek a further recapitalisation later in 2021 even after the latest €4bn rescue from the French government that includes the sale of new shares.
“We do have heavy, heavy debt that is holding back our balance sheet,” he said on Monday at the virtually held World Aviation Festival conference. “This may have to get looked at later in the year.”
Smith raised the possibility of another operation to bolster the carrier’s balance sheet at a time when uncertainty is weighing on the rebound in air travel in Europe. While some countries are lifting lockdown measures, the vaccine rollout has been slow and the reopening of shops and restaurants has not necessarily led to relaxing border controls and quarantine requirements.
The airline said earlier in April that the latest support by France was only a “first step” in repairing its balance sheet, while finance minister Bruno Le Maire also left the door open for more support.
Part of the most recent rescue plan is a capital increase of about €1bn, which was set to be wrapped up later on Monday. That will see the French government increase its stake while relegating its Dutch counterpart, which opted not to participate. China Eastern Airlines, another existing investor, is among those taking part.
“Banks, financial analysts, funds have been telling us that it’s been positive, more positive that I would have expected,” Smith said of the share issue.
The Netherlands is widely expected to announce its own support for the carrier. On Monday, Smith said talks are ongoing between the European Commission and the Dutch state, which has already received approval to convert debt to equity. He declined to say when any new package could be unveiled.
France and the Netherlands granted the group a total of €10.4bn in direct loans and state-backed guarantees in 2020. This served to inflate its debt load, while cash burn accelerated towards the end of the year when the health crisis worsened again.
The subsequent €4bn French package to Air France includes the ongoing capital increase, which could take the government’s stake to just shy of 30%, and the conversion of an earlier €3bn French state loan into hybrid instruments.
Stemming the airline’s cash burn and returning to a cash-neutral position will come from carrying more customers and cargo, Smith said. The airline is planning to raise capacity to at least 50% during the summer months.
European airlines are pinning their hopes on a travel rebound and have pointed to vaccination rollouts as critical steps, along with so-called immunity passports that would allow travellers to provide proof of Covid-19 inoculation, recovery or a negative test. The EU is aiming to roll out “digital green certificates” in time for holiday travel.
“I’m reasonably encouraged” that some kind of vaccine-passport system will be in place by the summer, Smith said, adding that he is also hopeful it will be easier to make transatlantic journeys in the coming months.
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