KLM receives €3.4bn in financial aid from Dutch Government

The Dutch government has today announced that the Dutch flag carrier, KLM, will receive a €3.4 billion support package to assist the carrier’s recovery after the COVID-19 pandemic. The financial aid will be given to the world's oldest airline once it meets a number of preconditions.

KLM Boeing 777-306ER registered PH-BVA Photo by Adam Lanzen | AeroNewsX

Back in April, AeroNewsX announced that Air France-KLM would receive a total of €10 billion from both the French and Dutch governments. Later that month, Air France received a 7 billion euro loan from the French government. Now almost two months on, the Dutch government has finally announced that KLM, commonly known as Royal Dutch Airlines, will receive the rest of the 10 billion euro package agreed by the two governments. This brings the total aid package between the French and Dutch governments to 10.4 billion euros. Both the Minister of Finance and Minister of Infrastructure and Water Management informed the government on Friday the 26th of June that “the support package for KLM has been formally submitted to the European Commission for approval.”

According to the Dutch Minister of Finance, Wopke Hoekstra, the financial package for KLM will consist of “a guarantee bank loan of up to 2.4 billion euros and a direct loan from the state of up to 1 billion euros.” But the support package does come with a number of conditions for the Dutch carrier. If Air France-KLM wish to receive the financial aid they will have to commit to a number of measures outlined in a statement by the Dutch department of finance.

The Dutch government will require KLM to reduce costs including “the number of night time flights and an active contribution towards sustainability." The statement goes on to outline that the government would like to see the number of night time flights reduced from 32,000 to 25,000. The government also recognised in its statement that KLM is committed “to reducing the aviation sector's CO2 emissions by 50 per cent per passenger-kilometre in 2030 compared to 2005.”

The oldest airline in the world will also have to commit to not paying dividends to shareholders and bonuses for the “lifetime of the aid." The government expects that the direct state loan of 1 billion euros will run “until the end of 2025.” According to a statement by the Dutch government, this direct loan will be “provided in tranches” depending on the progress of fulfilling the conditions already outlined. The bank loan of 2.4 billion euros which was granted by 11 banks, three located in the Netherlands and eight internationally will have a maturity of 5 years and is 90% guaranteed by the Dutch state.

In their own statement, KLM Chief Executive Pieter Elbers added that “the financing package is necessary to secure the long and difficult road of recovery in the coming period.” He said that “we will be working on the restoration of the route network and, on the other hand, on the development of the restructuring plan and the far-reaching conditions that have been imposed on the package.” The KLM CEO also expressed his “gratitude” towards the Dutch government and the Dutch banks “for their confidence” in their organisation and their future as an airline.

The Dutch government defended their decision to provide financial aid to the flag carrier stating that KLM “makes an important contribution to the Dutch economy and employment.” At a news conference in the Hague, Hoekstra said that “this package is needed to make sure that KLM and Air France can continue to fulfil the important role that they have in our economy.”

Before KLM can receive the financial support package from the Dutch government it will need to be approved by the European Commission and is still open to legal challenges by other European airlines. This includes the likes of Ryanair, which has recently been heavily criticising state aid to some European airlines.

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