European Commission regulators have approved a €4 billion ($4.7 billion) recapitalisation of Air France that could see the French state more than double its holding in Air France-KLM. 

The French government’s stake in the group will increase from 14.3% to a maximum of 30% as part of the arrangement, Air France-KLM says.

The Dutch government has confirmed that its holding will be diluted to 9.3%, from 14%.

Dutch flag-carrier KLM supports the recapitalisation measure, the group states, but will not benefit from the €4 billion aid, according to the conditions agreed by the Commission.

“The Dutch state is continuing discussions with the European Commission regarding potential capital-strengthening measures for KLM,” adds Air France-KLM.

The measures – approved by the Commission under temporary Covid-19 state aid rules – comprise the conversion of a €3 billion state loan already granted to Air France into a “hybrid capital instrument” and a capital injection by the state through a share capital increase, which is limited to €1 billion.

“These first recapitalisation measures are an important milestone for our group in this exceptionally challenging period,” says Air France-KLM chief executive Ben Smith. “They will provide Air France-KLM with greater stability to move forward when recovery starts, as large-scale vaccination progresses around the world and borders re-open.”

Shareholder China Eastern Airlines has agreed to take part in the capital increase “as part of further reinforcement of strategical co-operation with the group”, Air France-KLM states, but will keep its stake “strictly below 10%”.

Delta Air Lines, which holds 8.8% of the share capital in Air France-KLM, will not subscribe to the capital increase “due to the current framework of the CARES act” in the USA, the group says.

Air France-KLM

Source: Andrew Balcombe/

Among other conditions for proceeding with the recapitalisation, the French flag-carrier will be required to give up 18 daily slots at Paris Orly airport – albeit with strict labour conditions on the carriers that can take them on – while the French government has “committed to work out a credible exit strategy within 12 months after the aid is granted”, unless its “intervention is reduced below the level of 25% of equity by then”.

Additional measures to further strengthen the group’s capital are under consideration, Air France-KLM states, with “several” actions likely to be taken before the 2022 annual general meeting.

The €3 billion French government loan was part of wider measures worth €7 billion agreed in April 2020. The €4 billion loan that forms part of that package has been extended with a final maturity date in 2023, Air France-KLM states.

Dutch flag carrier KLM received final approval for state-backed financing of €3.4 billion in November last year. The Dutch state increased its stake in Air France-KLM to 14% in 2019, to almost match that of its French counterpart.