Air France-KLM Secures €1.5 Billion in Apollo Financing for Flying Blue Loyalty Program Subsidiary

In a significant financial move, Air France-KLM and private equity firm Apollo Global Management have successfully concluded a financing transaction, amounting to a substantial EUR1.5 billion (USD1.63 billion). The funding is designated for a specialized operating affiliate that will house the trademark and major commercial partner contracts associated with the joint loyalty program of Air France and KLM Royal Dutch Airlines, known as Flying Blue.

The completion of the transaction, announced on November 30, follows the signing of a definitive agreement between the parties on October 26. The financing, structured as quasi-equity, aims to support the new subsidiary focused on the Flying Blue loyalty program. This strategic move is part of the broader initiative by Air France-KLM to enhance its financial position and restore positive equity by the end of the fiscal year, as previously outlined in the Q3 2023 results.

Under International Financial Reporting Standards (IFRS), the financing is accounted for as equity. Apollo’s contribution involves subscribing to perpetual bonds issued by the new affiliate, carrying an interest rate of 6.4% for the initial four years, with Air France-KLM retaining the option to redeem them thereafter.

Importantly, the financing structure ensures minimal impact on Flying Blue members. Air France-KLM will retain management and operation control of the loyalty program, with Air France and KLM maintaining full oversight of the Flying Blue customer database. The statement emphasizes that the financing arrangement will not disrupt social aspects or employee contracts for Air France, KLM, or Air France-KLM.

This development comes on the heels of Apollo Global Management’s commitment of EUR1 billion (USD1.1 billion) in total funding to Air France-KLM, a pledge made public in July. The latest financing agreement adds another layer to the strategic collaboration between the two entities, following a prior capital injection into the MRO unit, Air France Industries-KLM Engineering & Maintenance.