Air France-KLM launches a new capital increase to overcome the pandemic crisis

In order to finally put the crisis caused by the COVID-19 pandemic behind and consolidate it recovery, Air France-KLM announced a new 2.26 billion euros recapitalization. French shipping company CMA CGM will become the airline’s third largest shareholder, behind the French and Dutch states.

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Like the rest of the industry, the company has been impacted by restrictions on global air movements from 2020. According to French newspaper Le Figaro, the decline in traffic has caused it to lose some 11 billion euros since then.

However, aviation has gradually begun to recover after the lifting of many of the measures imposed. In recent months, the demand for travel and the volume of operations continued to recover sharply. In this context, the Air France-KLM intends to use most of the proceeds to reimburse the exceptional aid granted by the French government.

Both the French and Dutch governments intend to subscribe to the capital increase to maintain the same levels of participation, which are 28.6% and 9.3%, respectively. For the French state, this will mean an amount of around 645 million euros, while for the Dutch government it will mean a sum of around 220 million euros.

On the other hand, shareholders China Eastern and Delta Air Lines will see their shareholdings reduced in favor of CMA CGM. Its entry is also strategic for air freight, which has become very profitable in recent months. The French company will invest up to 400 million euros and will reach up to 9% of the share capital if the operation is completed as planned. Process will end next June 9th. The Chinese airline’s stake will drop from 9.6% to 4.7% and that of the U.S. airline will be reduced from 5.8% to 2.9%.

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The operation is the second phase of the measures taken to improve the company’s finances. A first recapitalization had already taken place in April 2021. In addition, the French government had agreed to convert a 3 billion euros aid granted in the spring of 2020 into perpetual bonds.

The initiative had been approved by the European Commission, in a context of exceptional measures. However, Air France-KLM had to make some concessions. Among them, it gave up operating slots at Paris-Orly airport. Now, the airline seeks to be free of these restrictions at a time of consolidation of growth opportunities in the sector. The recapitalization will allow them to have «a solid financial base», according to the company.

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