PARIS (Reuters) – Air France-KLM may raise additional capital to bolster its balance sheet as travel begins to recover from the COVID-19 pandemic in coming months, Chief Executive Ben Smith said.

Smith, speaking at an online industry event on Monday as a 1 billion euro ($1.2 billion) share issue by the airline group nears completion, signalled that it could move relatively quickly to seek more funds and reduce debt.

“We do have heavy debt that is holding back our balance sheet, so this may have to get looked at again later in the year,” he said, adding that Air France-KLM was encouraged by European progress on vaccinations and digital health passes.

The capital hike sees the French government more than double its stake in the airline group to almost 30% as part of a total recapitalisation package worth about 4 billion euros announced earlier this month.

The stock issue at 4.84 euros per share will raise between 900 million and 1.04 billion euros, depending on the exercise of an increase option.

It follows last year’s 10.4 billion-euro debt bailout for the airline group, backed by the French and Dutch governments.

“This is positive for them in terms of getting through these difficult times but negative in that it’s giving them enormous debts for the future and potential political interference,” aviation consultant John Strickland said at the same event.

As part of the latest package, France is transforming 3 billion euros of government loans into hybrid bond instruments, while the Netherlands seeks EU approval for the similar conversion of another 1 billion. The new share issue dilutes the Dutch government’s equity stake to about 9.3%.

Air France-KLM currently plans at least to match the 50% of pre-crisis summer flight capacity it maintained last year and is optimistic about a sharper rebound, Smith also said.

“We’re loading capacity on an opportunistic basis,” the CEO added. “We do have enough crew trained and qualified to fly much more.”

($1 = 0.8317 euros)

(Reporting by Laurence Frost, editing by Louise Heavens, Kirsten Donovan)