Air France-KLM wants freedom from bans on acquisitions

Ben Smith, the Canadian executive in charge since 2018, told the Financial Times the Franco-Dutch group was also pursuing a “plan B” to industry consolidation, with a push to expand its low-cost routes. In addition, he aims to further integrate the airlines in the hunt for cost savings, overcoming some resistance from Netherlands-based carrier KLM. The plans were revealed as the group reported improved revenues and a lower-than-expected loss for 2021, with Q4 operating income above pre-pandemic levels as long-haul flights pick up again. The airline said it was considering options for a capital raising of up to €4bn, including a rights issue and quasi equity debt issues, that would help repay state aid. “We want to have the flexibility to participate [in consolidation] where it makes sense,” Smith said, adding however that the group had “no gun to our heads” in terms of timing. Shares in Air France-KLM fell 5% to E4.27 by mid-morning on Thursday in Europe in reaction to the capital-raising plans that would heavily dilute shareholders, analysts said. Air France-KLM received E10.4b in support in 2020 when the coronavirus outbreak hit, including through direct French and Dutch state loans. A E4b recapitalisation was backed by Paris last year, which included a ban on acquisitions. That is stifling expansion plans in areas such as cargo or maintenance and proving a hindrance at a time when German rival Lufthansa is circling Italy’s ITA Airways. Smith has sought to mend ties with French unions as part of efforts to restructure Air France, the struggling partner in the group formed by the merger with KLM in 2004 and which has cut close to 8,000 full-time jobs in the past two years. The group is aiming to return to profitability in its French market by 2024. Part of the overhaul has included shifting resources to low-cost carrier Transavia, which could form a greater part of an alternative plan if external moves remained off the table, Smith said. This would include building up connections between French cities outside Paris, such as Nice, and other European capitals. “We can’t stand these remedies and we’re doing everything we can to pay back the state aid as quickly as possible,” Smith said. “We are not totally hamstrung.” Air France-KLM could still potentially look at ITA, the former bailed-out Alitalia, or consider a commercial agreement that could lead to taking an equity stake in the company further down the line, Smith said. But the group would not “lose sleep” if one or two independent carriers, such as ITA, Norwegian or SAS, were picked up by competitors, he added, saying that he did not see a scenario of a larger or more threatening takeover of a group such as Ryanair materialising.<br/>