EU Commission Approves France’s €4 Billion Aid to Recapitalise Air France
The European Commission has approved France’s financial support of up to €4 billion for the recapitalization of Air France under the EU state aid rules.
Executive Vice-President Margarethe Vestager said that through this aid, France would help reinforce the equity of Air France as well as encourage the airline to face the difficulties caused by the COVID-19 outbreak.
“At the same time, the public support will come with strings attached, in particular, to ensure the French state is sufficiently remunerated, and further measures to limit distortions of competition. In particular, Air France has committed to making available slots at the congested Paris Orly airport, where Air France holds significant market power,” she added.
In a press release, the Commission pointed out that Air France is one of the major operators in France, with a fleet of more than 300 planes having a significant role in the country’s overall economy.
Moreover, the airline is owned by the Air-France-KLM Holding company, in which the French state holds a participation of 14.3 percent, AtoZSerwisPlus.Pl reports.
Only in 2019, the Air France-KLM airline group revealed its annual profit of around €750 million. However, due to the imposed travel restrictions by the French authorities, the company suffered huge activity reduction, which led to significant operating losses.
Under those circumstances, France informed the Commission about the decision to provide assistance to Air France.
The recapitalization measure that is part of the first step of the recapitalization group’s plan includes:
- The conversion of €3 billion State loan provided by France into a combined capital instrument.
- A capital contribution by the State through the contribution of new shares into a capital increase opened for existing market shareholders.
The Commission explained that the French measure is in line with Article 107 (3)(b) TFEU and the Temporary Framework’s conditions. More particularly, as follows:
- Conditions on the need, suitability, and the size of intervention: the capital injection will be just enough to ensure the survival of Air France and its Holding company.
- Conditions on the entry of State in the companies’ capital and compensation: the aid will prevent insolvency problems of Air France and its Holding company.
- Conditions on the State’s exit from the companies’ capital included: if after six years of receiving the aid, the State’s shareholding in the Holding is not reduced, the Commission will notify a restructuring plan.
- Conditions regarding the management: Air France is subjected to ban dividends, coupon payments, share paybacks, and bonus payments until 100 percent of the recapitalization is recovered.
- Restriction of cross-subsidization: the aid cannot be used to support companies that faced difficulties before December 2019.
- Obligations to maintain effective competition: Air France needs to make available around 18 slots per day at the Paris Orly airport to a competitor.
- Public openness and reporting: the company must publish the information on how the aid was used.
- Monitoring: an administrator will be appointed to monitor and ensure that the aid is being used in compliance with the Commission’s instructions.
The Commission has previously approved €350 million aid for Finavia to compensate for the damages suffered due to the Coronavirus pandemic. Another €400 million were approved to support companies in the Netherlands providing different travel services within the context of the pandemic outbreak.
