Following several weeks of discussions with the French state and banking institutions, the Air France-KLM Group and Air France were able to finalize various components of a support mechanism dedicated to Air France on which principle agreements are being finalized.
This support mechanism is comprised of a French state-backed loan of €4 billion (US$4.36 billion) granted by a syndicate of six banks to Air France-KLM and Air France. The French state is guaranteeing this loan up to 90%, and it has a maturity of 12 months, with two consecutive one-year extension options exercisable by Air France-KLM. In addition, a direct shareholder's loan of €3 billion (US$3.27 billion) from the French state to Air France-KLM with a maturity of four years, with two consecutive one-year extension options, exercisable by Air France-KLM.
This aid mechanism, which remains subject to approval by the European Commission, will enable the Air France-KLM Group to provide Air France with the means necessary to meet its obligations by continuing its transformation in order to adapt in a sector that the global crisis will severely disrupt.
The Dutch state has also stated its intention to support the KLM Group. Discussions to finalize the aspects and conditions of an additional aid are ongoing.
The transformation plan, which will be finalized in the coming months, will include economic, financial and environmental commitments. It will notably involve a review of Air France's activities looking to adapt them to the new market reality brought about by the crisis, and will have to strengthen its financial situation. This transformation will also contain an ambitious environmental roadmap to accelerate the Group's sustainable transition.
Once this plan has been finalized and when better visibility on post-crisis air traffic levels becomes available, the Air France-KLM Board of Directors will consider increasing its equity capital subject to market conditions. This could occur at the latest following the Board meeting scheduled to approve the financial statements for 2020. In this context, the French state has indicated its intention to examine the conditions under which it might participate in such an operation to increase its capital.
