How European states have stepped in to support carriers

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Faced with an immediate drop in revenues from the virtual of grounding of international scheduled passenger flights, European states governments have stepped in to find ways to keep their country’s airlines in business through the coronavirus crisis and beyond.

In Europe that was in part facilitated by European Commission regulators in March agreeing to temporarily ease existing state aid rules. The new temporary framework cleared member states to introduce several measures, such as setting up schemes to grant up €800,000 ($900,000) to a company to address urgent liquidity needs, as well as providing state guarantees for loans taken by companies from banks.

As the crisis has continued, and with scheduled passenger services only now slowly starting to be restored, a string of actions covering a range of European carriers have been initiated or remain under consideration.

Air France

France’s plan to provide €7 billion ($7.7 billion) of government-backed loans to help Air France-KLM through the coronavirus crisis was approved in early May by the European Commission.

The airline group has negotiated a French state-backed loan of €4 billion from a syndicate of six banks to be distributed to Air France-KLM and Air France. The French government is guaranteeing up to 90% of the loan, which has a 12-month maturity.

There will also be a direct four-year shareholder’s loan of €3 billion from the French government to Air France-KLM.

The French government has said that Air France must slash domestic flights and agree to work towards becoming the world’s “most environmentally friendly” airline, in order to access the bailout funds.


Italy’s government has taken emergency action and plans to renationalise Alitalia, which has been in extraordinary administration and seeking fresh private investment since May 2017. Italian transport minister Paula de Micheli has indicated it will look at potentially integrating some of the assets from Air Italy, which collapsed in February even before the coronavirus pandemic took hold in Europe, into the new Alitalia.


Austria’s government has agreed with Lufthansa Group a financial support package for Austrian Airlines worth €600 million ($667 million) to secure its future operation as a network carrier in Vienna.

The package includes €150 million in state aid from Austria’s government to cover coronavirus-related losses, and repayable loans worth €300 million from multiple local banks, Austrian says. Lufthansa will inject another €150 million in equity capital.

Austria’s government will guarantee 90% of the loans via the state’s COFAG agency, a special purpose vehicle to provide liquidity assistance to companies during the coronavirus crisis.


The Dutch government in April pledged an aid package to KLM to come in the form of state guarantees and loans amounting to between two and four billion euros.


Lufthansa Group’s supervisory board at the start of June approved a €9 billion ($10 billion) stabilisation package offered by the German federal WSF fund, accepting the conditions attached by the European Commission.

The company is formally recommending that shareholders similarly approve the measures during an extraordinary general meeting set for 25 June.

Under the agreement the WSF will contribute up to €5.7 billion to Lufthansa’s assets including €4.7 billion in equity. The measure will be supplemented by a syndicated three-year credit facility of up to €3 billion, provided by private banks and KfW – yet to be approved.

Lufthansa says the “silent participation” is unlimited in time and can be terminated by the company – either in whole or in part – on a quarterly basis.

WSF will acquire shares to build up a 20% shareholding in Lufthansa Group at a price of €2.56 per share – equating to an overall cash investment of some €300 million. It will be able to increase the shareholding further, to just over 25%, if there is a takeover of the company.


Several carriers have tapped the UK government’s Coronavirus Corporate Finance Facility support scheme.

EasyJet issued £600 million of commercial paper through the scheme, while British Airways parent IAG has applied for £300 million ($370 million) fund the initiative. Jet2 qualified for a €300 million loan under the programme to provide “standby liquidity” if required. Wizz Air has also said it is eligible to qualify for an initial £300 million under the scheme.

To be eligible for a loan under the scheme, companies must prove that they make a “material contribution” to the UK economy and they must have had an investment-grade rating as of 1 March 2020.


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