Air France-KLM 7 billion loan 'not a blank cheque' says Chief

Updated: May 27

In Tuesday's shareholders meeting, Air France-KLM Group Chief Executive Officer, Benjamin Smith, said that the 7 billion cash injection from the French government was 'not a blank cheque'. Smith mentioned that the airline would strengthen its environmental commitment through the loan and would also work on completing other objectives set by the French government.

Air France Airbus A330-200 arriving at Sint Maarten Airport. Photo by Andrew Pries | AeroNewsX

Air France announced last week that it would retire its Airbus A380 fleet indefinitely. The withdrawal was originally scheduled for 2022. The carrier says it will replace the double decker-aircraft with the Boeing 787 and Airbus A350.⁣ This came amid struggles which were a consequence of the coronavirus pandemic. The crisis has hit Air France-KLM hard. The group has worked hard to cut costs since the pandemic began affecting travel demand.

“We also took decisive financial action over the past few months. We immediately revised our capex investment plan downwards by more than 700 million euors, cut our operating costs by 500 million," Smith said.

However, the Chief Executive had a positive outlook. “I have absolutely no doubt that we will emerge from this crisis stronger than ever before.”

Smith then thanked the French government for its 'exceptional support,' having committed to 7 billion in financial aid. However, the CEO stressed that this was 'not a blank cheque’. The money would be used for the ‘transformation of Air France into a more sustainable company with a significantly reduced environmental footprint.'

The airline group is now 'working hard’ on a restructuring plan which will incorporate many conditions set by the French government. Meanwhile, the Dutch state shows ‘strong commitment’ to the group, Smith said, with continued interest for a 2-4 billion euro cash injection.

Air France-KLM is 'committed to a more virtuous, more sustainable aviation model that is better adapted to the world and to our customers.'

Both airlines will cut emissions per passenger by 15% by 2030 compared to 2005 levels. This will be pushed through the accelerated phase out of the A340 and A380 fleets as well as KLM's 747 fleet. This will allow the group to tick off its environmental objectives and would further stress fleet simplification and harmonisation meaning KLM ‘will rely most heavily on 777 and 787’. If the crisis is prolonged KLM has the flexibility to reduce the number of A330s in the fleet, Smith said.

As for Air France, the Benjamin Smith says: “The Boeing 777-200ER and Airbus A330-200 fleet provide downward flexibility at Air France giving the airline the necessary flexibility to weather any future storms on the horizon.”

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