Air France-KLM confirmed on May 5 that it had entered into “exclusive discussions” with Apollo Global Management regarding the potential financing of €500 million of a dedicated operating affiliate of Air France, owning a pool of assets of Air France dedicated to its engineering and maintenance activity (spare components).
The proceeds of the transaction, which would be qualified as equity under IFRS, would be allocated to general corporate purposes.
The airline group commented that the financing would be “non-dilutive, structured through a quasiequity financing instrument”, similarly to the one raised by Air France on a pool of spare engines in July 2022.
The contemplated structure related to this financing would involve no change on operational and social aspects, said the airline, noting that there would be no change in the way to use the spare components, and no impact on Air France or Air France-KLM employees contracts.
Meanwhile, in its first quarter earnings announcement, Air France-KLM also confirmed that is had received several nonbinding offers on quasi equity financing supported by its loyalty programme, Flying Blue. The airline group stated only that “discussions are still ongoing with potential investors”.
Air France-KLM has worked hard to reorganised its balance sheet and in April 2023, finally shed the last of the state aid with the full repayment of the remaining €300 million French State hybrid perpetual bonds as well as paid the required compensation of the French State for the shares subscribed in April 2021 as per the EU Covid-19 Temporary Framework.
This transaction allowed the Group to fully exit the Covid-19 recapitalisation state aid as well as its related restrictions and without any change of the capital ownership.
Air France-KLM refinanced these repayments and the compensation for a total of €407 million through the issuance of new French State hybrid perpetual bonds, which have no state restrictions attached. The bonds contain similar financial conditions as the ones that were repaid and will be assimilated to the €320 million hybrid perpetual bonds issued on 17 March 2023 with non-call date and interest rate step up postponed by an additional two years to March 2029.
Benjamin Smith, Group CEO, described the payment of the debt as “important milestone for Air France KLM” as it has released from the conditions imposed by the state and allowed the airline group to “continue the successful turnaround we have begun thanks to our continued and accelerated transformation, and that we will emerge stronger out of this trying period, as a leader with a strong sustainability focus”.
Also in April 2023, Air France-KLM and Air France combined and KLM implemented two new Sustainability Linked Revolving Credit Facilities (RCF) for a total amount of €2.2 billion (see separate news story on this transaction further in the News section).
In its first quarter announcement, Smith said that the airline group now “stands on its own two feet” and remains focused on “further strengthening the balance sheet” while “accelerating our decarbonisation efforts”.
The group revenues were up more than 40% to €6.3bn in the first quarter of 2023 on the back of higher capacity and passenger load factor, with a gross profit of €286 million and adjusted free cash flow of €683 million, driven by “strong summer sales”. The group posted a net loss of €344 million, however. Air France-KLM net debt has fallen to €5.5bn during the period.