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Tuesday, August 16, 2022

Air France-KLM gets virus bailout, green conditions still pending

Air France-KLM will get a state-backed bailout of around €10 billion in loans and guarantees. But the lack of strict conditions in the aid packages announced by the French and Dutch governments on Friday (24 April) has already stoked criticism.

The French government was first to show its hand on Friday afternoon, when Minister for Finance Bruno Le Maire unveiled a €7bn scheme for the carrier that includes a €4bn state-backed bank loan and a €3bn direct loan.

Le Maire said the package is an example of “historic support” for France’s national airline, aimed at safeguarding the 350,000 jobs sustained by the firm, but warned that it is “not a blank cheque”.

Details still have to be hammered out and the government insists that ensuring profitability and more sustainable policies will be linked to the €7bn.

Greenpeace’s Sarah Fayolle said that “we want to know exactly how Air France will make its green transition when there is absolutely no constraint, no sanction, and no ambition mentioned.”

The Dutch government – which is also a shareholder in the group – will dip into its pockets as well. Finance chief Wopke Hoekstra said the firm would get €2-4bn to help it ride out the huge slump in air travel demand caused by the coronavirus outbreak.

“We’ve always said we will do everything it takes to help Air France-KLM through this crisis. Schiphol airport and its main user KLM are vital to the Dutch economy and employment,” Hoekstra told a press conference.

Talks are still ongoing on the Dutch side too but the deal already stipulates that there should be no dividend pay-outs and top earners should take a pay-cut. The government also says that night flights should be reduced as part of a new sustainability drive.

Dutch Greens MEP Bas Eickhout told EURACTIV that he expects the European Commission to assess the bailout with its Green Deal policies firmly in mind and that his national colleagues would hold the government to account.

Other green lawmakers on the European Parliament’s transport committee called for the same in a letter to Ursula von der Leyen and Margrethe Vestager, the EU executive’s president and competition chief, respectively.

The letter said that state aid should only be approved if airlines present credible emissions-cutting plans, pledge to pay tax on fuel and phase out short-haul flights where trains can realistically do the job instead.

“If taxpayers are to bail out airlines, there must be a quid pro quo – this industry must help secure our future in the face of an unfolding climate emergency,” the letter concludes.

Austria is one of the few governments to suggest attaching green strings to aid but members of the Commission have so far sent mixed messages about climate conditioning.

Green Deal chief Frans Timmermans told MEPs last week that “every euro we invest must flow into a new economy rather than old structures” and encouraged member states to put the bloc’s flagship environmental policy at the heart of all its decisions.

Transport Commissioner Adina Vălean told EURACTIV in an interview, however, that she would not prioritise or support setting such green criteria at this stage, insisting that saving airlines and dealing with the recovery period should be the focus.

The aviation industry is not unified in its support for seeking bailouts. Ryanair CEO Michael O’Leary has threatened to launch legal action if the EU gives the green light to aid packages that “selectively gift billions of euros to inefficient flag-carriers”.

In his own letter to Vestager earlier this month, the outspoken boss of the low-cost flyer said support schemes should be open to all airlines and be proportionate to each firm’s share of traffic.

Ryanair is the most affected of all European airlines in terms of sheer numbers. More than 300 of its aircraft have been grounded by virus lockdown measures.

It is doubtful though that the Commission, which has already significantly relaxed its state aid rules during the crisis, will insist on extra criteria during its assessment of bailouts.

One of the few stipulations it has made to date is that airlines must respect the EU’s passenger rights charter and offer passengers a full refund rather than just vouchers as part of reimbursement measures for cancelled flights.

More bailout announcements are expected soon. Lufthansa is on course to get a €10bn package from the German government as early as this week, although politicians on Sunday (26 April) disagreed over whether the state should have a role in running the flag-carrier.

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