Will France become the main shareholder in Air France-KLM?

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Air France-KLM wants to reposition itself on the market

In order to become significantly more competitive again in an increasingly complex market, Air France-KLM has implemented fundamental restructuring. In addition to better service, increased comfort and higher airfares with more environmentally friendly aircraft, there are a few other key factors in the strategy that Air France-KLM intends to implement in the coming years. Withstanding the effects of the pandemic on air traffic to the bitter end, the airline said it was a top priority. Specifically, the airline group had announced, among other things, that it wanted to reposition itself at the upper end of the market.

For this purpose, in addition to the introduction of a Premium Economy Class, the class should also be modified – major changes are planned here, especially at KLM. While several airlines have announced the reduction of their First Class, Air France is deliberately trying to counter the trend and is relying on its position, which is quite important in France, when it comes to French First Class.

In the coming weeks, the French government will increase its stake in the company from 14% to almost 30%. But there can be no question of nationalization. The aim is for Paris to become the majority shareholder in Air France-KLM again and to distance itself from the Dutch state, which now weighs as much as the French state, which is slowing down decisions.

François Lenglet, French journalist

Indeed, Ben Smith, CEO of Air France-KLM, is convinced that the attractiveness of France as a travel destination, combined with Air France’s exceptional first class product, offers the opportunity to regain market share. To achieve these goals, the airline group needs recapitalization. The French state now wants to double its share of the capital of Air France-KLM, as in one Interview announced. This announcement does not come as a surprise, because Minister of Economic Affairs Bruno Le Maire had already declared last November that the state would be generous in the event of further financial support. It is “a question of national sovereignty to have a national airline” and “tens of thousands of jobs” are currently at stake.

Recapitalization is imperative in the current situation

According to François Lenglet, the company will be recapitalized with a further four to five billion euros in spring 2021. In this context, it should be recalled that the French airline had already received a loan of seven billion euros from the French state last spring. The Dutch airline KLM received a loan of 3.4 billion euros in the autumn. However, these loans are not sufficient. To date, Air France-KLM has accumulated more than € 12 billion in debt. Originally, both airlines saw great potential for growth of more than 20 percent over the winter to popular travel destinations in the Caribbean and La Réunion, but due to new entry restrictions, they are now faced with stagnating booking figures and around 15 million euros in losses every day.

Conclusion on France as the main shareholder of Air France-KLM

According to the latest information, neither Air France nor the state have officially confirmed this message. According to the business journalist François Lenglet, however, a doubling of the state participation as part of a recapitalization is almost imminent. Given the current situation, which does not seem to be improving, this news would not be surprising. One thing seems to be certain anyway: the French state will not let Air France go under.