Air France, unions rail against EU bailout conditions

By Laurence Frost

PARIS (Reuters) – Air France and its pilot unions protested on Wednesday against EU demands that the airline give up takeoff and landing slots at its Paris base in return for government aid.

Brussels wants the French airline, part of Air France-KLM, to cede 24 Orly airport slots as a condition for approval of a state-backed recapitalisation, La Tribune reported this week.

“We wouldn’t understand being subjected to drastic measures that weaken our position in Paris,” Group Chief Executive Ben Smith told L’Express magazine in an interview – adding the slot demands could give low-cost Ryanair a foothold at Orly.

The SNPL pilot union accused the EU in a statement of seeking to “destroy the efforts of Air France employees”.

Battered by the coronavirus pandemic, many traditional airlines have received government aid under European Union guidelines that temporarily relax state aid rules.

In return for its 9 billion euro ($10.8 billion) bailout last year, Germany’s Lufthansa reluctantly gave up 24 slots at each of its main hubs, Frankfurt and Munich – or three flights a day for four competitors’ aircraft at each base.

The EU executive and French government have declined to comment on discussions under way about Air France bailout terms.

Under the plan submitted to Brussels, France would swap a 4 billion euro shareholder loan granted to Air France-KLM last year for hybrid debt or perpetuities, lightening the group’s debt burden, according to French media reports confirmed to Reuters by company and government sources.

The Dutch government, which formally resigned last month but remains at work ahead of March elections, has yet to say whether it will take part in the recapitalisation or convert its own 1 billion euro loan to KLM. The two governments each own close to 14% of the airline group.

But appearing before a parliamentary committee on Wednesday, Dutch Finance Minister Wopke Hoekstra said some KLM slot concessions at Amsterdam Schiphol seemed inevitable as the EU seeks to “keep a level playing field” among member states and companies.

“So it’s reasonable to expect that remedies will be part of the solution,” Hoekstra said. “You can see in the Lufthansa case what you can roughly expect.”

($1 = 0.8312 euros)

(Reporting by Laurence Frost; Additional reporting by Toby Sterling in Amsterdam and Gwenaelle Barzic in Paris; Editing by Peter Cooney)