Air France-KLM today announced the full repayment of its bank loan guaranteed by the French State.

Air France-KLM announced on Wednesday that it had finished repaying the balance of the state-guaranteed bank loans granted to help it get through the Covid-19 Pandemic crisis, which was 2.5 billion euros.

The Franco-Dutch airline group, which returned to profit in 2022 after two years of abysmal losses due to the health crisis, was saved from bankruptcy by the French and Dutch states, and after two recapitalizations, the group emerged intrinsically more profitable from the crisis.

• Air France-KLM has fully repaid the remaining €2.5 billion from its initial
  €4 billion Bank loan guaranteed by the French State, granted during the Covid-19 crisis.
• The Group’s solid cash position combined with the €1 billion proceeds of the Sustainability-Linked Bond issued in January 2023, has enabled to accelerate and close the repayment in full of the outstanding “PGE”.
• This full repayment will contribute to smoothing the Group’s debt profile, reduce financial costs and limit residual exposure to floating rates.

In 2022, Air France-KLM recorded a strong rebound of its revenues, an improved operating result and a positive net income resulting in a strong cash position of €10.6 billion by the end of 2022. On the back of this robust operational performance, the Group successfully issued in January 2023 an inaugural Sustainability-Linked Bond for a total aggregate amount of €1.0 billion.

The Group released a statement saying,

#AirFranceKLM today announced the full repayment of its bank loan guaranteed by the French State (“PGE”), making a final step towards the full repayment of States support liquidity measures.

Looking back , to sail through the Pandemic battering , the management team carried out a cost reduction plan, getting rid of its least profitable aircraft and reducing its workforce to 75,500 full-time equivalents, against 85,600 at the end of 2019.

Given this context, Air France-KLM has now reached an agreement with the French State and the syndicate of nine banks participating in the “PGE” to proceed with the full repayment of the outstanding €2.5 billion, as announced during the FY 2022 results presentation on February 17^th, 2023. To do so, the Group used the €1.0 billion proceeds of the Sustainability-Linked Bond and €1.5 billion of its available cash.

The group had already previously repaid 1.5 billion euros out of the 4 billion PGE it had benefited from at the start of the crisis, in 2020.

This current development, which has received the green light from the Commission, will not change the capital structure, the French State still holding 28.6% of the shares.

However, the group will no longer have to respect the constraints that Brussels had linked to this aid: prohibition on paying dividends, moderation of executive compensation and limitation of acquisitions.

Air France-KLM said,

This full repayment will contribute to smoothing the Group’s debt profile, reduce financial costs and limit residual exposure to floating rates, and marks a final step towards the full repayment of the current French State liquidity support measures.

Aviation is bouncing back , Air France-KLM’s fleet renewal continues in an ongoing effort to improve the Group’s economic and environmental performance. Keeping this in view, in a January development, the  Air France-KLM Board of Directors has approved a firm order for 4 Airbus A350F full freighter aircraft, to be operated by Martinair on behalf of KLM Cargo.

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