How the restorative Air France-KLM wants to reduce its debt mountain

A Megadeal with the French CMA CGM and advanced conversations with the American Apollo about half a billion investment. The Air France-KLM, who is hit hard, is eagerly looking for capital. But the real hit, such as publishing new shares, is still waiting.

Needless Aviation Group

This morning the ailing Franco-Dutch aviation group announced that it is in conversation with the American investor Apollo Global Management about a capital injection of 500 million euros.

The company wants to use the money to pay off part of its debts at the French State. Air France-KLM sold 3 billion euros in bonds to the French State in April last year, which has guaranteed a total of 7 billion euros in loans since the outbreak of the Coronacrisis. The Dutch cabinet supports KLM with 3.4 billion euros, because the company is considered indispensable for the Dutch economy. Half a billion loss for Air France-KLM, Ticket prices up.

‘Looks like expensive loan’

Stock market commentator Hans de Geus questions the deal with Apollo. “It is a mystery to me which structure and conditions are behind this. And above all: what does it mean for the shareholders who have put money in Air France-KLM? It looks like an expensive loan.”

Inquiring with the company itself yields little clarification. According to an Air France-KLM spokesperson, the half billion of Apollo contributes to stronger equity. De Geus: “They call it a capital injection for the maintenance division and say that Apollo is not taking equity interests. And that there is no doubt about the importance of the current shareholders.”

That raises more questions at the stock market commentator. Check it out on Ipostocksplanner.com for more information. “There are of course conditions on a financial deal with a commercial party like Apollo. The question is which? If it is a loan, reduces that the debt burden of Air France-KLM does not. And if it is not a loan, then there is Destruction. ” Investor club VEB demands clarification about Million Bonus CEO Air France-KLM.

French container giant

Earlier this week it was announced that Air France-KLM will work closely with the French freight operator CMA CGM. The two parties want to work together in the field of air freight for at least ten years. As part of this deal, the container giant shareholder of Air France-KLM becomes an interest that can amount to 9 percent. CMA CGM can also appoint one board member in the Supervisory Board of the Aviation Group.

The two announcements are part of the frantic search from Air France-KLM to 4 billion euros in external financing. That money is desperately needed to support the balance of the company and the further repayment of state aid. The latter must be done according to agreement from May 2023. “Air France-KLM still not attractive for many investors.”

Reinforce

“Since the beginning of this year, the company has been working hard to attract capital and strengthen the balance,” says analyst Ruxandra Haradau-Döser of Kepler Cheuvurux from Frankfurt. “In our opinion, the company is currently doing better than competitors. But the balance is weak, with a strong negative equity. We think that is the most important reason why Air France-KLM is still not attractive for many investors.”

According to the analyst, this can change if Air France-KLM issues new shares or bonds. Although the importance of current shareholders will be guaranteed to be watered down, according to the aviation company, both the French state (28.6 percent shareholder) and the Dutch state (9.3 percent) are prepared to do so.

Better sentiment

“Air France-KLM is considering a capital increase and is thereby prepared to issue new shares when the company sees market opportunities,” says Haradau-Döser. “But partly due to the war in Ukraine, high oil prices and the inflation morning there is a negative sentiment on the stock market and there are fewer stocks of share than normal.”

Air France-KLM must therefore wait for a more positive sentiment to return. “I suspect that sentiment can improve for the sector as air traffic restores itself in the summer. If not, then probably only in the spring or summer of 2023.”

Another 7.7 billion euros in debt

Air France-KLM benefited in the past three months from lifting travel restrictions in a large number of countries, so that more people could fly. The war in Ukraine, on the other hand, again caused fewer bookings, while the higher fuel prices also hit the company.

All this led to a loss of 552 million euros in the first timeThe quarter on a doubled turnover of 4.4 billion euros. The total net debt that Air France-KLM still has is 7.7 billion euros. That is 600 million euros less than at the end of 2021.

In the meantime, Air France-KLM is optimistic about the rest of the year. The company expects that the devices will be filled for 85 percent in the current quarter and the quarter of them may even be 90 percent afterwards.