The European Union has waded-in on the state aid wrangling at Air France-KLM. The EU has insisted that the airline group must give-up 24 Paris ORY slots in return for further state aid. That lead to Air France and its pilot unions protesting in the streets yesterday.
Make no mistake, the French government has been putting up every hurdle it can in front of Ryanair and easyjet over this past decade or so to prevent them decimating the Air France hold on traffic, these slots would be gold dust to both LCCs and they would fight for them (and well they should). Ryanair and easyjet need a good foothold at ORY and this is the chance. Wizz might also be interested. The SNPL pilot union accused the EU in a statement of seeking to “destroy the efforts of Air France employees”.
France, the most protectionist state within the EU will stay quiet on this for as long as it can, but there will be further protests. But the French will have to cave-in or forget supporting Air France-KLM because in return for its €9 billion bailout last year, Germany’s Lufthansa gave up 24 slots at each of its main hubs, Frankfurt and Munich.
The French government has already made it clear that it is going to increase its stake in Air France, in a move that will shore up the airline with up to €5 billion and has also won EU support for its plan to help Corsair. Under the plan France would swap the €4 billion shareholder loan to Air France-KLM made in 2020 for hybrid debt or perpetuities, in the process decreasing debt.
It is all running against every rule the EU has spouted over the past decades, and is a sick joke when you consider that Flybe was let to fail because EU rules prevented the UK government from stepping-up in time. But the level playing field policy of slots for aid is a massive gain for all European LCCs and for our industry as a whole and it is one area where the EU has done very good work.
But what about KLM in all this? Well, that is another matter entirely. The Dutch are in their election run-in at the moment and the last thing any Dutch politician will want to do is offer KLM any money that will go to Paris. Will it take part in any re-capitalisation under the French lead? Only behind very tightly closed doors, or after the election is the honest answer to that. However, the Dutch Finance Minister, Wopke Hoekstra, was forced to concede that some KLM slot concessions at Amsterdam Schiphol “seemed inevitable” and quite rightly he added that “You can see in the Lufthansa case what you can roughly expect.”
Expect a bidding war for AMS and ORY slots between Ryanair, easyjet and Wizz, and do not rule out significant Norwegian interest in AMS slots either. The saving of AirFrance-KLM will finally let-in the LCCs in a more meaningful way. Those airlines that manage to bid successfully for the slots should do very well indeed and we will be looking out for the inevitable bidding war.