Air France-KLM’s Dutch (Royal Dutch Airlines) is set to receive a $3.8 billion bailout from the Netherlands, a move that seeks to help it recover from the drastic fall in revenues due to the global COVID-19 pandemic.
According to the Dutch Finance Minister, Wopke Hoekstra, the package consists of a $2.7 billion, five-year revolving credit facility from 11 banks with 90% guaranteed by the Dutch government. It also includes a $1.1 billion direct loan from the government repayable by the end of 2026.
KLM will draw on these funds on a pro-rata basis over the loans period, with the first amount to be used to repay and terminate an initial $746 million credit facility granted on March 19, 2020, at the start of the crisis.
However, the Dutch support comes with strings attached, with KLM required to suspend dividend payments. Furthermore, the Dutch government will appoint an observer to KLM’s board to ensure taxpayer money is spent only on the Dutch subsidiary, but won’t have control of the business.
It will also force painful reforms, including pay and spending cuts, a freeze on bonuses and dividends, as well as ambitious environmental targets that were sought by the Dutch parliament as a condition for aid.
Nevertheless, the package is still subject to approval by both the Dutch Parliament and the European Commission.
Air France-KLM is a Franco-Dutch airline holding company with its headquarters at Charles de Gaulle Airport in Tremblay-en-France, near Paris. Both France and the Netherlands are shareholders of Air France-KLM, Europe’s second-biggest airline group after Lufthansa.
In April, Air France-KLM received a $10.9 billion state package from France to enable it to remain afloat during the COVID-19 pandemic that has seen airline revenues dip due to the suspension of international passenger flights.
Reuters reports that Paris is ready to vouch for 90% or more of the bank loans to Air France, rather than the 70% initially offered.