Air France-KLM launches E2.3b share sale

Air France-KLM Tuesday launched a E2.26b share sale to shore up its balance sheet and repay some French state aid as it seeks shareholder backing to look beyond the pandemic and invest in resurgent air travel. The second rights issue in just over a year brings Europe's second-largest airline by revenue closer to repaying government pandemic support and meeting European Union conditions for participating in any future airline consolidation. European airlines are experiencing a surge in ticket sales clouded by fears of a recession triggered by inflation and the war in Ukraine. CE Ben Smith said the widely anticipated move was part of efforts to "strengthen our financial autonomy" and regain strategic and operational flexibility. "As the recovery continues and our economic performance recovers...we want to be in a position to seize any opportunity in a changing aviation sector and to be able to accelerate our environmental commitments," he said. Air France-KLM shares were down 6.9% by late morning. The group confirmed a goal of reducing the ratio of net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) to around 2.0-2.5 by 2023. "With good outlook for its EBITDA in the coming quarters plus further improvement of its operations mid term, in our view the rights issue will be received well," ING said in a note. But it cautioned there were open questions on issues including the strength of airline competition. Analysts say some low-cost carriers have emerged strengthened from the crisis by using it to drive down costs. Air France-KLM said E1.7b of the share proceeds would be used to repay French aid granted in the form of subordinated bonds in April last year.<br/>