Dutch government KLM €3.4 billion rescue plan, with some conditions
The Dutch government has said the national airline, KLM, is set for a €3.4 billion bailout package, if it meets certain targets, but this still requires regulatory approval from Brussels, in case it conflicts with EU state-aid rules. KLM was promised between €2-4 billion at the end of April, when both the Dutch and French governments pledged financial support to the Air France-KLM group. France’s €7 billion bailout was quickly approved by the EC’s competition regulators. The €3.4 billion package would be made up of €2.4 billion in state-guaranteed bank loans and a €1 billion direct loan. The loan would be provided in tranches and last up until 2025, with each payment only made after the government has judged that conditions are being adequately fulfilled. Senior staff who earn more than three times the average salary will have a 20% pay cut. Until the state’s investment is repaid in full, no dividends will be paid out to shareholders and management will not get bonuses. Cost-cutting measures worth 15% will have to be made. The number of night flights from Schiphol will be cut, but details are not yet decided. KLM will also have to halve CO2 per passenger-kilometre by 2030, BUT there is no cap on KLM’s total CO2 emissions.
Dutch government unveils KLM rescue plan
By Sam Morgan | EURACTIV.com
The Netherlands’ national airline, KLM, is set for a €3.4 billion bailout package should it meet certain employment, financial and sustainability targets, the Dutch government announced on Friday (26 June). It still requires regulatory approval from Brussels.
KLM was promised between €2-4 billion at the end of April, when both the Dutch and French governments pledged financial support to the Air France-KLM group. France’s €7 billion bailout was quickly approved by the European Commission’s competition regulators.
But the Dutch government embarked on tough negotiations, as lawmakers were in disagreement about what kind of conditions to set for the airline.
The Dutch government’s proposed €2-4 billion aid package for national airline KLM was debated in parliament on Wednesday (6 May), but lawmakers are still divided over what strings – if any – to attach to the bailout.
On Friday morning, ministers revealed a €3.4 billion package made up of €2.4 billion in state-guaranteed bank loans and a €1 billion direct loan.
The latter will be provided in tranches and last up until 2025, with each payment only dispersed after the government has judged that its conditions are being adequately fulfilled.
“This package is necessary to ensure that KLM and Air France can continue to fulfil the important role they play in our economies,” said Minister for Finance Wopke Hoekstra, who also warned that job losses will nevertheless “likely be unavoidable”.
“We have been trying to distribute the pain as fairly as possible in recent weeks,” the minister added. As part of the deal, senior staff that earn more than three times the average will be asked to forego 20% of their salary.
Until the state’s investment is repaid in full, no dividends will be paid out to shareholders and management will not be eligible for bonuses. Cost-cutting measures worth 15% will also have to be made.
KLM CEO Pieter Elbes said “this is a very important step and I express my gratitude on behalf of all KLM colleagues to the Dutch state and the banks for their confidence in our organisation and our future.”
The government also made it clear in its announcement that it expects KLM and Air France to both undergo restructuring.
The French government’s €7 billion bailout of its flag-carrier and its insistence on reducing short-haul domestic flights should not be seen as an opportunity for low-cost airlines like Ryanair and easyJet, Environment Minister Elisabeth Borne said on Monday (22 June).
The €3.4 billion rescue deal is dependent on KLM making changes to the way it does business, including reducing the number of night flights from the country’s main hub at Schiphol.
However, in a letter to parliament, government ministers do not establish a timeframe for the reduction of night flights, although it does elaborate that it will be a stepped approach to cull them from 32,000 to 25,000.
Making those cuts will be dependent on the use of a nearby airport as a spillover hub and more substitutions of flights with train journeys to cities like Brussels and Dusseldorf, the letter adds.
KLM will also have to cut CO2 per passenger-kilometre in half by 2030 under the agreement, although using such a metric could allow for emissions to actually increase as it does not cap total output.
The Austrian government’s €600 million bailout of its national airline has been praised for establishing tighter green goals, which also includes a ticket price floor.
Schiphol airport is one of the busiest hubs in Europe and a major generator of employment. As part of the agreement, the government is extending its termination notice period from nine months to five years, in order to reduce any uncertainty about its hub-status.
There is little of substance in the agreement about passenger rights and whether KLM should spend the money on refunding passengers that request reimbursement. However, the Dutch government recently confirmed it would tell its regulator to start enforcing EU rules after previously ignoring them.
After weeks of negotiations, it is now set: Austrian Airlines (AUA) is saved from insolvency by the Black-Green government. For the Greens, who are in a governing coalition in Austria for the first time, it was a difficult litmus test. EURACTIV Germany reports.
Desperately seeking Brussels’ approval
The Dutch government made a pre-notification to the Commission in order to assess whether its package would flout state aid rules. A full notification was made to the competition regulator earlier on Friday.
On Thursday (25 June), the EU executive gave the green light to Lufthansa’s €9 billion bailout after a lengthy assessment and negotiation period. The KLM package is likely to have an easier time, as the Dutch state is already a shareholder in the firm.
Both France and the Netherlands own 14% of the airline group, while the German government will come on board as its flag-carrier’s largest shareholder with 20%. That development was one of the main factors to trigger Commission concerns.
The virus outbreak’s devastating impact on the aviation industry has prompted governments to shell out more than €30 billion in aid so far.
France to ban commercial flights on shortest domestic routes
France plans to ban commercial air travel on the country’s shortest domestic routes in a bid to prevent low-cost carriers picking up links Air France-KLM is being forced to abandon as part of the terms of a Government bailout package. The aim of stopping Air France from flying domestic routes, if the trip can be made by train in under 2.5 hours, to cut CO2 emissions, is not to allow in other airlines instead. Austria has also placed constraints on short-haul flights, as part of a state-funding plan for Deutsche Lufthansa. The domestic flights ban would include about 40% of internal French flights. The carbon reductions achieved by this would actually be tiny – about 6-7% of Air France’s total. Ryanair plans to operate 6 French domestic routes this summer, but says they are on longer routes, not included in the ban. Air France-KLM received €7 billion in loans and guarantees from the French government, and the Minister said the airline would be required to become “the most environmentally friendly airline on the planet”. However, the overall bail-out package is flawed, and is unlikely to produce the desired, necessary, reductions in Air France’s CO2 emissions.
Air France must cut CO2 emissions, and domestic flights as condition of state aid: says France’s Finance Minister
France’s Finance Minister, Bruno Le Maire, has told Air France that it will have to cut its carbon emissions and domestic flights, as conditions for government financial support. The French government has offered the airline a €7 billion package of state-guaranteed bank loans, and loans directly from the state. This is on condition that the airline map out a path to profitability and set the goal of “becoming the most environmentally friendly carrier in the world.” [Whatever that means]. Air France will have to halve its CO2 emissions per passenger, and per kilometre – compared to their 2005 level – by 2030. The CO2 emissions from domestic flights in France will have to be halved, and that means cutting the numbers drastically. Another condition is that 2% of the fuel used by its planes would have to be derived from alternative, sustainable sources by 2025. [Problem is there are almost no properly environmentally “sustainable” fuels, and pushing for them is likely to increase deforestation and loss of land for food growing, and for wildlife]. Air France also have to buy new planes, with lower CO2 emissions, from Airbus.