Air France-KLM redeems €500mn of debt, mulls new equity

Air France-KLM has redeemed EUR500 million euros (USD565 million) from a EUR4 billion (USD4.53 billion) French-government-guaranteed bank loan that the European Commission approved in April 2021 to help the group survive the slump in demand from pandemic-related travel restrictions.

In a statement, the Air France and KLM Royal Dutch Airlines parent also reiterated that discussions are ongoing on “further capital strengthening measures” at the group level – measures that could include raising new equity or revenue participation (quasi-equity instruments), depending on market conditions.

In the December 13 statement, Air France-KLM explained that it had also managed to negotiate an extension of the maturity on its overall loan from May 6, 2023, to May 6, 2025.

It said it had agreed with a syndicate of nine banks providing the loan, and the French state, to bring the sum down to EUR3.5 billion (USD4 billion), a move made possible “following early signs of a recovery in worldwide air traffic combined with improved access to capital markets.”

It summarised that its redemption profile had been amended so that:

in May 2023, a partial redemption of EUR800 million (USD904 million) leads to an outstanding amount of EUR2.7 billion (USD3.05 billion);
in May 2024, a partial redemption of EUR1.35 billion (USD1.53 billion) leads to an outstanding amount of EUR1.35 billion;
and in May 2025, there is final redemption of the remaining EUR1.35 billion.
Air France-KLM summarised the agreement as “a new milestone on the restructuring path of the debt profile and balance sheet of the group.”

The announcement followed reports two weeks ago claiming that Air France-KLM had been considering delaying a planned capital increase because of the new wave of travel restrictions governments were implementing to slow the spread of the Omicron variant.

In related news, Air France revealed on December 16 that it would raise its capacity to the United States to around 90% of pre-pandemic levels for the year-end holidays after the Biden administration eased border restrictions last month. Overall, the carrier’s capacity will rise to 75% of 2019 levels during the period, a spokesman told Bloomberg. Air France-KLM told ch-aviation earlier this month that despite Omicron, it considered its year-end target of a 70% recovery in revenue compared to pre-Covid levels still reachable.