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Air France-KLM launches its recapitalization

This time, Air France-KLM has decided to leave the crisis behind! The Franco-Dutch airline announced on Tuesday, May 24, the launch of a capital increase of 2.25 billion euros. The operation will be the occasion for a review of the Air France-KLM funding round. France and the Netherlands, holders respectively of 28.6% and 9.3% of the shares, should maintain their position.

On the other hand, the two airlines, the American Delta Airlines (5.8%) and the Chinese China Eastern (9.6%), should see their participation diluted in the new entity. This reduction will benefit the new entrant, the French shipowner CMA CGM, which has undertaken to take up to 9% of the capital of Air France-KLM. He will invest in exchange up to 400 million euros and will become the third shareholder of the group.

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With this new money, the company “will affect around 1.7 billion euros” reimbursement of bonds entered into by the State, while “the balance will reduce the net debt” of the company, which reached 7.7 billion euros at the end of March. The operation ultimately confirms the pre-eminence of France in the airline and the marginalization of the Netherlands.

Sector consolidation

In February 2019, the Dutch government carried out a hostile and surprise raid to match France’s level of participation, then stalled at 14%. A maneuver which will have cost him dearly and which will have been completely erased by the crisis linked to Covid-19. Now recapitalized, the company run by Canadian Ben Smith can resume its forward march. The sudden onset of the pandemic in 2020 had weighed on the finances of the airline, which had accumulated losses of nearly 11 billion euros.

To escape bankruptcy, Air France-KLM had to go through certain concessions, in particular to the regulatory authorities of the European Union. The company had to give up a certain number of take-off and landing slots at Paris-Orly, an airport with a limited number of slots. Air France also had to remove certain domestic connections, less than two and a half hours by TGV, in the name of environmental protection.

A lesser evil, because these destinations were heavily in deficit. More embarrassing for its smooth running, the group had undertaken not to take more than 10% of the capital of another company until it had reimbursed at least 75% of the aid it received. A real handicap at a time when the consolidation of the air transport sector has started, thus marking the end of the crisis.

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Air France, formerly a historical partner of Alitalia, would like to take part in the round table of ITA, the new Italian company built on the rubble of Alitalia. An operation that would allow it to retain control of the third market in continental Europe. At the opening of the financial markets, the operation did not seem to receive the consent of investors, and the Air France-KLM share lost 5.5%.

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