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European Commission approves up to €4 billion French measure to recapitalise Air France

The European Commission has approved French plans to grant up to €4 billion for the recapitalisation of Air France through its Holding company. The measure was approved under the State aid Temporary Framework.


European Commission approves up to €4 billion French measure to recapitalise Air France

April 8, Brussels: Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “France will contribute up to €4 billion to reinforce Air France's equity and help the airline face financial difficulties resulting from the coronavirus outbreak. At the same time, 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. In particular, Air France has committed to making available slots at the congested Paris Orly airport, where Air France hold significant market power. This gives competing carriers the chance to expand their activities at this airport, ensuring fair prices and increased choice for European consumers.”



The French recapitalisation measure

Air France is a major network airline operating in France. It is owned by the Air France-KLM Holding company, in which the French state holds a 14.3% participation. With a fleet of over 300 planes, Air France plays a very important role in the French economy, in terms of employment and connectivity for many French regions including those overseas (Départements et Régions d'outre-mer “DOM-TOM”).


In 2019, the Air France-KLM airline group reported an annual operating profit of approximately €750 million. However, as a result of the travel restrictions introduced by France and by many destination countries to limit the spread of the coronavirus, Air France and its Holding company have suffered a significant reduction of their activities, leading to major operating losses.


In this context, France notified the Commission under the Temporary Framework a recapitalisation of up to €4 billion of Air France and its Holding company. The recapitalisation by France, which is part of the first step of the recapitalisation plan of the group, comprises:


(i) the conversion of the €3 billion State loan already granted by France (approved by the Commission in May 2020 under case number SA.57082) into a hybrid capital instrument; and


(ii) capital injection by the State, through the subscription of new shares in a share capital increase, opened to existing shareholders and the market, at a limit of EUR 1 billion depending on the size of this operation.


KLM, the other strategic subsidiary of the Air France-KLM group, will not benefit from the aid. Among others, this is ensured by (i) the specific features of the aid instruments; (ii) the corporate and governance structure of the Air France-KLM group; and (iii) a commitment that relationships between Air France and its Holding, on the one hand, and KLM, on the other hand, will continue to be based on market terms.



The Commission found that the French measure is in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. In particular, as regards:

  • Conditions on the necessity, appropriateness and size of intervention: The capital injection will not exceed the minimum needed to ensure the viability of Air France and its Holding company, and will not go beyond restoring their capital positions compared to before the coronavirus outbreak.

  • Conditions on the State's entry into the capital of companies and remuneration: The recapitalisation aid will prevent insolvency of Air France and its Holding company, which would have serious consequences on French employment, connectivity and foreign trade. The French State will receive appropriate remuneration for the investment and there are additional mechanisms in place to incentivise Air France and its Holding company to buy back the State's equity participation obtained as a result of the recapitalisation.

  • Conditions regarding the exit of the State from the capital of the companies concerned: France committed to working out a credible exit strategy within 12 months after the aid is granted unless the State's intervention is reduced below the level of 25% of equity by then. If six years after receiving the recapitalisation aid, the State's shareholding in the Holding is not significantly reduced in line with the Temporary Framework, a restructuring plan for Air France will be notified to the Commission.

  • Conditions regarding governance: Until 100% of the recapitalisation is redeemed, Air France and its Holding company are subject to bans on dividends, non-mandatory coupon payments and share buybacks. Moreover, until at least 75% of the recapitalisation is redeemed (in line with the conditions under the Temporary Framework), a strict limitation of the remuneration of their management, including a ban on bonus payments, is applied. These conditions also aim at incentivising Air France, its Holding company and its owners to buy back the State's equity participation obtained as a result of the recapitalisation as soon as the economic situation allows.

  • Prohibition of cross-subsidisation and acquisition ban: To ensure that Air France and its Holding company do not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the Single Market, they cannot use the aid to support economic activities of integrated companies that were in financial difficulties prior to 31 December 2019. Moreover, until at least 75% of the recapitalisation is redeemed, Air France and its Holding company are in principle prevented from acquiring a stake of more than 10% in competitors or other operators in the same line of business.

  • Commitments to preserve effective competition: Air France will benefit from a recapitalisation measure above €250 million and holds a significant market power in Paris Orly airport, where Air France has a large presence. That airport is structurally highly congested, meaning that airlines cannot get access to the landing and take-off slots that they request for their operation at the airport. Therefore, in line with the requirements of the Temporary Framework, additional measures to preserve effective competition are necessary. These consist of Air France making available up to 18 slots per day at Paris Orly airport to a competing carrier. These measures will enable the lasting entry or expansion of a competing carrier at this airport, to the benefit of consumers. In addition, these measures require that the competing carrier obtaining Air France's slots bases its aircraft and crews at Paris Orly airport, in compliance with national and EU labour laws.

  • Public transparency and reporting: Air France and its Holding company will have to publish information on the use of the aid received, including on how the use of the aid received supports the companies' activities in line with EU and national obligations linked to the green and digital transformation.

  • Monitoring: A trustee, who will have to be appointed by Air France and its Holding before 5 May 2021, will monitor and ensure, under the Commission's instructions, compliance with the different commitments. The trustee will report periodically to the Commission.

The Commission concluded that the recapitalisation measure will contribute to manage the economic impact of the coronavirus outbreak in France: the measure aims at restoring the balance sheet position and liquidity of Air France and its Holding company in the exceptional situation caused by the coronavirus pandemic while maintaining the necessary safeguards to limit competition distortions. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in Temporary Framework.


On this basis, the Commission approved the measure under EU State aid rules.


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