AF/KL seek multibillion Euro loan package

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  • AMcWhirter
    Participant

    Reuters today reporting that Air France seeks four billion while KLM would lie two billion Euros in loans guaranteed by France and The Netherlands.

    https://www.reuters.com/article/us-health-coronavirus-airfrance-bailout-idUSKBN21L16F

    2 users thanked author for this post.

    openfly
    Participant

    Perfect time for KLM to get out of the partnership?!

    5 users thanked author for this post.

    Edski777
    Participant

    Nice thought, openfly. But it would sink AF, so the French will never let it happen.
    It does show what a bad deal the takeover was for KLM.


    LuganoPirate
    Participant

    Not quite airline related, though many companies thats serve the airline industry are eligible, the Swiss government has announced the following help:

    “The scheme has two tiers of loans. Loans under CHF 500,000 are interest free and 100% guaranteed by the federal government. Loans between CHF 500,000 and CHF 20,000,000 come with an interest charge of 0.5% and are 85% government guaranteed. The 0.5% interest rate applies only to the portion guaranteed by the government. Banks decide the rate on the rest. No loans of more than CHF 500,000 have been made so far, according to the State Secretariat for Economic Affairs (SECO)

    The scheme, which was put in place on 25 March 2020, allows companies with annual revenue less than CHF 500 million to borrow sums up to 10% of their turnover”.


    MarcusGB
    Participant

    KLM staff are currently being paid by The Government for 3 months, as are most Dutch Employees.
    Perhaps both Governments French and Dutch, will loan or simply take a greater share of the % of shareholdings, which are around 14% each as it stands. KLM last year abruptly increased their Shares to balance with the French, due to long standing differences, clear if you talk to KLM employees re the AF side.

    i cannot see either Governments letting the Airline disappear, though it may downsize or split.

    There will need to be an Exit strategy from this for them, to re-introduce flying, some routes, Build up gradually where they can.
    As on other posts, this will depend on Governments and countries opening borders for travel, restrictions being lifted.
    There will be no vaccine for at least 18 months most experts agree.
    We still know so little about this virus, immunity once had, or able to re engage it or carry it on? Science does not yet know.
    Tests are already being asked for that people are not positive (I noticed for entry to Thailand, plus a huge insurance with medical cover).

    Until this is established i don’t think KLM / AF will be able to get off the ground, unless they start to lift restrictions within the EU, and it seems as demonstrated by the EU Presidents comments, “The EU is Not operating as one”, but individual countries with their own policies and methods for now.


    PointyMark
    Participant

    I hope that any loan comes with the requirement for AF/KL to refund pax in CASH for canx flights. It is outrageous that French govmt has allowed AF/KL to breach EU legislation on pax rights!


    FaroFlyer
    Participant

    I hope that any loan comes with the requirement for AF/KL to refund pax in CASH for canx flights. It is outrageous that French govmt has allowed AF/KL to breach EU legislation on pax rights!

    Transavia, owned by AF / KLM give vouchers, not cash refund. Their website states that, if you have not used the voucher within 12 months then you can have a cash refund.


    capetonianm
    Participant

    Those amongst us (moi?) who would like to see a divorce between Air France and KLM may see our wish achieved before too long :

    KLM & Air France Parting Their Ways?

    There is trouble brewing with the combined Air France-KLM due to the financing needed from their respective national governments.

    2 users thanked author for this post.

    canucklad
    Participant

    Actually, KLM finds itself in a rather unique situation, especially under the current challenging conditions…

    And rather than seeing AF as a rock in KLM’ s noose, reverse the thought process and consider the precedents that AF’s business model has set.
    Despite having the highest percentage / ratio of employees (with associated costs ) to both fleet and passenger number (revenue) anywhere in the Western world AF merrily rolls on with the complicit support of those who occupy the Palace at Versailles

    It would seem rather hypocritical and short sighted for the Dutch government not to demonstrate the same degree of safety net as the French have done and continue to do year after year !


    MarcusGB
    Participant

    This matter was settled a few days ago.

    https://news.gtp.gr/2020/04/24/covid-19-air-france-klm-group-secures-billions-funding/

    KLM are already looking to the future and have policies for Boarding and on Board in all aspects (Link given on LHR thread for no airport precautions for CV-19).
    They will also retire the 747’s, and increasingly use the 787 9/10’s as these are more spacious, whilst keeping some middle seats free in Y.
    Business Class is only 1-2-1 as Air France A350’s are also, in a more Suite like setting.
    With these measures will come further savings from more economical Aircraft, better on Board technology, travel standards, and reflect the re-surfacing of Air travel gradually. They are to implement their Environmental goals ahead of time which are are being incorporated, where KLM / Schiphol have been World Leaders for some years.

    Schiphol has already implemented Policies in using the airport with appropriate distancing measures, etc

    (I receive more KLM / AF group updates due to my Platinum FFP and regular use of the group, so i simply have more info sent to us promptly, than other Airlines. No bias intended!)


    canucklad
    Participant

    a quote from Marcus’s link
    “The agreements are still subject to approval from the European Commission”

    And of the 9 million euro’s KLM get 2 million and AF receive 7 million ?
    Nothing like chucking good money after bad. Hopefully the loans will be dependent on fundamental changes in the way the groups model is run


    MarcusGB
    Participant

    The Dutch Government are also to offer Euros 2-4 Billion in Emergency funding.
    This is on top of the amount from The French Government.
    Both countries own about 14% of each of their Airline, as other Airlines such as Delta, China Eastern, employees, small and Corporate Shareholders.

    As you can see from here, the ownership of Schiphol Airport is also majority Dutch Government, City of Amsterdam etc.
    It employs 70,000 people, 40$ of traffic dependent on KLM. It is responsible for most of the tourism and income to the whole commerce of Amsterdam, one of the most popular cities in Europe.
    There have been more Daily UK flights to Amsterdam from the many airports and Airlines, than any other city in Europe. I believe it was around 430 weekly.then add on other European connections…..

    Ownership of Schiphol Airport
    State of the Netherlands (69.77%) Government of Amsterdam (20.03%) Groupe ADP (8.0%) Government of Rotterdam (2.2%)

    https://nltimes.nl/2020/04/24/klm-big-fail-netherlands-pledges-eu4-billion-bailout

    As Schiphol is always voted “Best European Airport”, the cleanliness, and reliability, forward planning, modernisation, and how it is kept, i see it as a far better model than LHR for eg.

    KLM i have found as an excellent Airline in Europe, the Employees regard themselves as a family, and through many hard times have worked in many roles voluntarily, to support through difficult times. Their Customer service has always been one of the best, far outweighing BA. They approach you with compensation and putting matters right, if anything goes wrong, you do not have to ask. I have several friends in Senior Management of KLM, and a Director at Schiphol. I heard constant dedication over many years.
    KLM made 4x the profit of AF for the group, and have cut staff down to the bone.

    Personally, i do not like the link with Air France, they each a totally different philosophy, that in no way matches.
    AF give a completely different impression when you fly with them with their attitude, overstaffed, and grim dysfunctional CDG Base.
    I find the KLM Model a great expression of Dutch Culture and attitude and a credit to The Dutch Community.

    But such is the investment from The Dutch Overall in Schiphol, and in KLM, i can understand, and it is to their credit that they wish to support both Businesses, as it provides a huge benefit to a small country.
    If a Company chooses to become independent of The State as BA, then clearly they are less well placed for State support, as we today see with British Airways. Therefore that commercial / Privatised model, seems to fail in today’s climate, for Taxpayer support.

    The same with Virgin Australia now in administration, and ??? with Virgin Atlantic.
    Other good well placed International Airlines with State investments, will and are being supported around The World.

    Today look at KLM and Air France, Schiphol being supported.
    Compare that to the Privatised LHR and British Airways, and you see which is the better Model, and the stake people feel they have in their National Aviation.

    However the International Airlines re-emerge from this Worldwide, i feel incredibly sad for the many who will lose their occupations, and have been affected by something outside of all commercial control, no matter which model they have. Despite their hard work, dedication, these are the people who make our travel enjoyable, enabled.
    All travel and Tourism, and all the linked chains of workers, there will be hundreds of Thousands Worldwide.

    KLM have offered credits for their regular customers for flights, and refunds where viable, as i have seen in their refunds or credit policy… and received.

    5 users thanked author for this post.

    capetonianm
    Participant

    I echo Martin’s sentiments. I’ve flown KLM a lot, s/h and l/h, both classes (and the ‘comfort’ seats). The spirit of a well run airline is evident from beginning to end of the experience. A couple of minor problems, delays, lost luggage, and so on, always sorted out with that lovely Dutch mixture of being efficient, fair, and pleasant.

    Another joy is a break of a day or so between flights, leave suitcases at the airport, and hop off to Leiden, Alkmaar, Utrecht, Haarlem, or one of the other lovely smaller towns and cities. I’m not a great lover of Amsterdam but transport from Schiphol to almost anywhere is so easy.

    I did some IT work for KLM (at Schiphol) before and during the AF ‘takeover’. The distrust and resentment of the Dutch towards their French ‘colleagues’ was tangible, to the extent that I ended up feeling sorry for the very pleasant French lady in the group, who was the butt of jibes and sniping, some quite nasty. The Dutch are very straightforward and that is often taken as rudeness.

    They have a reputation for being mean, quite undeserved. What they are is very precise about money. One lunchtime when my KLM canteen card ran out of credit I asked someone to put the extra Euro or so on hers. Next morning at coffee she came and asked me for it! Had it been the other way round, she would probably have approached me to give it back to me.

    On the train in one morning there was a lady who hadn’t had time to buy a ticket and the train guard wanted to make her pay a penalty. I asked if he could just stamp my multi-trip ticket for her fare and he said he wasn’t supposed to but he did anyway. Next morning that lady came and found me on the platform to give me the €5 or so for the ticket, even though I told her she didn’t need to (company money so why should I care!)

    When working with the Dutch I forget that they have their own language, as their English is so good and they have an Anglo-Saxon mentality and sense of humour.

    The AF-KL marriage was made in hell and the sooner it is dissolved the better for both parties.

    3 users thanked author for this post.

    JohnnyG
    Participant

    Capetonianm

    If the AF-KL marriage was made in hell and the sooner it is dissolved the better for both parties.

    I am wondering why haven’t KLM tried to dissolve it then?

    What was the logic in the first place?

    Genuine question.

    1 user thanked author for this post.

    capetonianm
    Participant

    JohnnyG:
    Genuine answer, I don’t know much, I can only tell you based on what I observed at the time.

    I was involved on the IT side with distribution, fares, and ticketing. They used different systems so the main challenge was consolidating under the same system and trying to pull KLM into the Air France system at the same time creating as much homogeneity as possible so that KL and AF employees could be transparently interchangeable across any workstation on both networks.

    KLM employees saw that they were being taken over and submerged by the AF culture and to a degree I feel that was true.

    I believe there was also a question of slot availability and KLM would have given or rather did give Air France access to more slots at Schiphol and additional destinations with the supposedly seamless set up that is one of the the stated advantages of alliances.

    The merger enabled the French government to reduce its shareholding in AF from about 55% to about 45% which I believe helped it to be more compliant to a European ruling.

    Another bone of contention at the time was that KLM had been profitable where AF had not been profitable mainly due to its poor industrial relations and frequent strikes. Plus ca change!

    As to why KLM didn’t try to dissolve the partnership, I can’t answer as we go into the realms of something which I really don’t understand : company politics. I think that’s best answered by somebody who has a better knowledge internally of KLM.

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