EU approves €7bn in state aid for Air France

The European Commission on Monday approved €7bn (£6.2bn) in state-backed aid for Air France to provide urgent cash to deal with the coronavirus outbreak impact.

The support will take the form of a state guarantee on 90% of €4bn in loans and a €3bn subordinated shareholder loan to the company by the French state in return for a commitment to improved profitability and reduction in greenhouse gas emissions, the commission added in a statement.

Airlines around the world have been crippled by the collapse in air travel as governments imposed lockdowns to stop the pandemic's spread. Entire fleets have been grounded as owners seek state bailouts to provide much needed cash.

The bloc last month loosened rules on state subsidies so member states could provide aid to companies in financial difficulty as a result of the pandemic.

EU competition chief Margrethe Vestager said the industry was important” in terms of jobs and connectivity” and noted that Air France had played “an essential role in the repatriation of citizens and for the transport of medical equipment”.

“With a fleet of over 300 planes, Air France is a very important company for the French economy, in terms of employment and connectivity for many French regions including those overseas,” the commission said.

“As a result of the imposition of travel restrictions introduced by France and by many destination countries to limit the spread of the coronavirus, Air France has suffered a significant reduction of its services, which resulted in high operating losses.”

"In the absence of the public support, Air France would likely face the risk of bankruptcy due to the sudden erosion of its business. This would likely cause severe harm to the French economy," it said.

The French and Dutch governments each hold almost 14% of the Air France-KLM group, created by a merger in 2004. KLM is set to receive €2bn - €4bn in state aid.