Air France-KLM’s board expected to meet on Monday on refinancing plan

According to two sources familiar with the matter at hand, Air France-KLM’s board is expected to meet on Monday to discuss a state-backed refinancing plan aimed at strengthen its balance sheet following a year of coronavirus-induced shutdowns.

Sources went on to add, Air France-KLM, which last year received $12.2 billion (10.4 billion euros) in state-backed loans, has been discussing a multi-stage re-capitalization plan to lighten the resulting debt load. The plan has however run into headwinds with demands from the European Union asking that Air France give up its Paris-Orly take-off and landing slots.

Earlier this week, French Finance Minister Bruno Le Maire signaled a breakthrough in negotiations saying that an agreement is within reach in “a matter of days”.

Air France-KLM declined comment on the airline group’s planned board meeting.

Initially EU officials had demanded a similar number of slots to the 24 ceded by Germany’s Lufthansa in Frankfurt and Munich in return for its government-backed capital hike, said sources close to the talks. This however drew protests from Air France, its unions and the government.

Both, France and the Netherlands own close to 14% of Air France-KL. The Netherlands has held separate talks with the EU over converting its 1 billion euro loan to KLM into a hybrid debt in return for slot concessions at Amsterdam-Schiphol.

According to analysts, converting the government debt will not be sufficient to right Air France-KLM’s balance sheet; they have predicted that a further dilutive capital increase will follow.

Air France-KLM has told investors that it plans on raising “quasi-equity and equity” after its balance sheet recorded 5.42 billion euros in negative shareholder equity as of December 31.

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