France takes firm control of Air France-KLM

The French state has taken firm control of Air France-KLM after the recapitalisation with €1.03 billion via the issuance of shares.

Late Monday, the airline announced that it had successfully placed the 214 million new shares at the prices of €4.84 per share; the issuance amounts to nearly half of the company’s market capitalisation.

The French state raised its stake in the airline to 28.6 per cent, while the government of the Netherlands declined to participate in the new share offering. The Dutch government’s stake is reduced to 9.3 per cent. China Eastern Airlines increased its stake from 8.8 percent to 9.6 percent.

Dutch Finance Minister Wopke Hoekstra said the government has agreed to allow its stake to be diluted, although he had previously lobbied to raise the stake to 14 per cent. Hoekstra had spent €774 million in public funds to raise the Dutch stake in Air France-KLM to that level. Hoekstra had said at the time that he was seeking an additional seat on the board of directors for his country.

“This change in shareholder proportions has no consequences for the preservation of public interests,” he wrote in a note to the Tweede Kamer (Dutch parliament) on Monday.

“The success of the capital increase and renewed support from our existing shareholders shows that our investors are confident in the prospects for Air France-KLM,” said CEO Benjamin Smith.

As previously announced, loans worth €3 billion will also be converted into perpetual hybrid bonds to strengthen Air France’s capital position.

Air France-KLM owes a total of about €10 billion to the French government, the Dutch government and private investors.

France has agreed with the European Commission that Air France must surrender 18 slots at Paris-Orly Airport in exchange for receiving state aid, but the Dutch government is still in talks over what conditions will be attached to its support for KLM at its base at Schiphol Airport.