Dutch airline KLM handed €3.4b lifeline to ride out virus crisis

The Dutch national carrier KLM is to receive a state rescue package of 3.4 billion euros to help it survive the coronavirus crisis, and to reinvent itself as a more sustainable company.

The KLM rescue package comes after France granted €7 billion in state funding to Air France in May, 2020. AFP FILES / AFP

The Netherlands will appoint a supervisor to the KLM board which, according to Reuters, will ensure the money goes exclusively to KLM and is not absorbed by the Air France-KLM parent company.

The support package is made up of a direct state loan of 1 billion euros and a separate credit facility of 2.4 billion euros provided by 11 banks – three Dutch and eight international – but guaranteed by the government.

Both loans, with a duration of five years, will be drawn on a pro-rata basis. First off, KLM will use the money to repay an existing loan of €665 million that was granted in March.

France, Netherlands reach deal on 3.4 billion KLM bailout - company, minister https://t.co/KgFZKrXz1O pic.twitter.com/qitYFuzY0k

— Reuters UK (@ReutersUK) June 25, 2020

Thousands of jobs on the line

The KLM lifeline comes after France granted €7 billion in state funding to Air France in May. With their fleets largely grounded, both airlines have been hit hard by the Covid-19 pandemic.

Thousands of Air France jobs are in doubt as the company’s management prepares to deliver its reorientation and survival strategy to aviation industry unions on 3 July.

Following the bailout, Air France was told to improve its profitability and its environmental impact, and to start rethinking its regional network in France.

• Green groups slam €7bn Air France aid package to weather Covid-19

Likewise, the Dutch loan has been granted under the condition that KLM become a more sustainable airline.

It’s been asked to improve its performance and competitiveness through a comprehensive restructuring plan that includes contributions made by employees.

The company will suspend dividend payments to shareholders until the loans – which still need to be approved by the European Commission and Dutch Parliament – have been fully repaid.