French state to back up Air France with 7bn euros of loans

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The French government is prepared to back up Air France with seven billion euros (7.6 billion dollars) worth of loans and loan guarantees, Economy Minister Bruno Le Maire said on Friday.

The state will lend Air France 3 billion dollars directly and will guarantee bank loans for a further 4 billion euros, Le Maire told TF1 television.

“Air France’s aeroplanes are grounded. There are no flights and so we must support Air France,” Le Maire said.

Le Maire added that he wanted environmental commitments from Air France – part of the Air France-KLM group – in return for the backing, as well as “an effort to be more profitable”.

“Air France must be the airline that of all those on our planet most respects the environment,” he said.

The government was also working to arrange a 5-billion-euro loan for carmaker Renault, Le Maire said.

Air France-KLM said the bank loan would be for a term of 12 months with two possible one-year extensions.

The government loan would be a “shareholder’s loan” with a four-year term and two consecutive one-year extension options exercisable by Air France-KLM.

The aid would have to be approved by the European Commission, the group added.

Air France would also be working on a transformation plan and when that was completed, the group’s board “will consider increasing its equity capital subject to market conditions,” the group said.

“In this context, the French state has indicated its intention to examine the conditions under which it might participate in such an operation to increase its capital,” Air France-KLM added.

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The French government is currently the largest single shareholder of Air France-KLM, with a 14.3 per cent stake.

The Dutch government also has a 14 per cent stake, bought in a surprise operation last year amid apparent fears in the Netherlands that KLM, the former Dutch flag carrier which is the smaller but more profitable part of the group, could lose autonomy.

The group said that the Netherlands had also “stated its intention to support the KLM Group”.

“Discussions to finalise the aspects and conditions of an additional aid are ongoing,” the group said.

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