Air France-KLM raises $2.4b in rights issue to slash debt

Bloomberg

Air France-KLM vowed to expand low-cost and transatlantic flights after raising 2.26 billion euros ($2.4 billion) to repay a chunk of the state aid that helped the carrier survive the Covid-19 crisis.
The proceeds of the rights issue launched last month will be used to reimburse about 1.7 billion euros of bonds issued last year and held by the French government, and to further reduce debt, the Franco-Dutch airline said.
The operation “helps us to reimburse a big portion of the aid, which is a good thing,” Chief Executive Officer Ben Smith said in an interview on BFM radio. The carrier will now be able to carry out its strategy, he added.
“Our entire fleet will be working this summer,” Smith said. “We’ve decided to go very, very hard on transatlantic, even more than before the crisis.”
Air France-KLM is also adding to its budget Transavia brand to rival competitors like EasyJet Plc, he said.
The transaction brings Air France-KLM closer to completing a targeted 4 billion-euro capital increase as it seeks to pay down borrowings in line with European Union requirements on state funding, which currently bar the airline from participating in the consolidation of an industry roiled by the pandemic.
Air France-KLM has been linked to one of two bidding groups for Italia Trasporto Aereo, the successor to failed Italian airline Alitalia SpA. While Smith has cautioned the carrier has been burned before on investments in the predecessor to the Italian airline, he said the carrier would consider any outside opportunities after the rights issue.
Like other European airlines, the group is laying on capacity as the removal of Covid
travel curbs triggers a surge in bookings. At the same time, carriers remain wary of bottlenecks at major airports and prospects beyond the summer as inflationary pressures add
to costs and weigh on consumer spending.
The operation allowed French shipping giant CMA CGM SA to take a 9% stake in the carrier as part of an air-cargo alliance announced last month. It now has a seat on the board.
“This operation, which is part of a broader strategy to transform and streamline our group, will allow us to emerge with a stronger balance sheet and increased strategic flexibility,” Smith said in the statement.