Is Air France-KLM heading towards nationalization?
Like other carriers in Europe, the containment measures to fight the coronavirus COVID-19 epidemic have greatly affected Air France’s revenue. The national airline could be saved by a state intervention once the crisis passes.
Being one of the most affected countries in Europe by the epidemic, France sees its air traffic hitting records low, forcing multiple airports to interrupt commercial operations. As of March 31, 2020, Paris Orly Airport (ORY), the second airport of the French capital mainly dedicated to domestic traffic, will be temporarily closed to commercial flights. "During this period, Paris-Orly airport will remain permanently accessible to state aircraft and to emergency medical aid or medical evacuation flights," the government said. Air France, one of the main operators of Orly, rerouted its operations to Paris Charles de Gaulle Airport (CDG), where several terminals had to be closed due to inactivity. Other airports in the rest of the country, such as Nantes, followed suit.
Since the beginning of the crisis, rumors of Air France-KLM nationalization have been spreading. The airlines’ group is already owned at 14.3% by the French state. While the hypothesis of an increase in participation was initially dismissed, Prime Minister Edouard Philippe eventually said that nationalizations were not being ruled out, ensuring that for Air France the state would "take responsibility ".
A similar prospect was reiterated on March 29, 2020, by the Secretary of State for Transport, Jean-Baptiste Djebbari. "The State shareholder will have all its role to play in the post crisis, it is a shareholder up to 14% of the Air France-KLM group," Djebbari said, adding “the market will most likely be in a very large consolidation period, with potential failures of intermediary actors. The State will then say the strategy it intends to pursue with Air France-KLM in particular”. He concluded that “in times of crisis, we must have all the means, all the tools of public intervention, including this one.”
On March 16, 2020, Ben Smith, CEO of Air France-KLM Group, announced the group would gradually reduce its activity by up to 90%, and temporarily lay off up to 80% of the nearly 40,000 employees that constitute its workforce.
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