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EU greenlights €4 billion aid plan for Air France

Richard Connor
April 6, 2021

The European Union has approved a plan to prop up Air France amid a pandemic-induced collapse in passenger numbers. In return, the airline must give up some flight slots to competitors.

Air France Airbus A319-100 with registration F-GRHE landing at Amsterdam Schiphol International Airport
Air France will give up some of its flight slots in return for access to the aidImage: picture-alliance/NurPhoto/N. Economou

The European Commission on Tuesday gave the go-ahead for the French government to inject up to €4 billion ($4.7 billion) into its national carrier Air France.

Although the airline is struggling with the impact of the COVID-19 pandemic, the rescue package did come with conditions.

What terms did the EU impose?

In a statement, the commission — which acts to ensure that state aid does not give companies an unfair advantage — said Paris is allowed to contribute €4 billion to help keep Air France afloat.

However, to access the help, the airline would have to relinquish about 18 takeoff and landing slots per day at Orly, Paris' second-largest hub after Charles de Gaulle.

"The public support will come with strings attached, in particular, to ensure the French state is sufficiently remunerated, and further measures to limit distortions of competition," said EU Competition Commissioner Margrethe Vestager.

"This gives competing carriers the chance to expand their activities at this airport, ensuring fair prices and increased choice for European consumers."

French Finance Minister Bruno Le Maire said the French state would also be allowed to raise its stake in the national carrier from the current 14.3% to 30%.

"This is good news for Air France and good news for the French," Le Maire told the France Inter radio station.

Dutch stake to be diluted

The French recapitalization means the Dutch government must accept a reduction of its 14% share of the Air France-KLM holding company — a surprise acquisition it made in 2019.

Dutch Finance Minister Wopke Hoekstra said the government of the Netherlands has agreed to allow its stake to be diluted to 9.3%.

In a previous round of support around COVID-19 last year, France gave Air France-KLM €7 billion. Meanwhile, the Netherlands provided €3.4 billion in loans and loan guarantees.

The airline KLM is not expected to benefit from the latest round of French aid.

Previous challenges by Ryanair

Budget Irish carrier Ryanair has challenged previous French aid for Air France, saying it distorts competition.

In the past, the commission has often said it sympathizes with Ryanair's criticism of state subsidies for legacy national airlines.

In February, Ryanair lost a legal fight in the EU General Court against state aid being granted to Air France and Sweden's SAS through national schemes.

In EU courts, Ryanair is seeking to contest the German government's bailout of Lufthansa, as well as similar schemes in Spain, the Netherlands, Denmark and Portugal.

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