Home Private Equity Air France-KLM in talks for €500mn private equity funding

Air France-KLM in talks for €500mn private equity funding

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Air France-KLM has entered exclusive talks with New York-based private equity firm Apollo Global Management for a EUR500 million euro (USD530 million) capital injection into an engineering and MRO affiliate that owns a pool of spare engines. The aim, it said, is to help repay French state aid.

“The proceeds of the transaction would enable Air France-KLM and Air France (AF, Paris CDG) to partially redeem the French state perpetual bonds” in accordance with European Union rules governing Covid-related state support, it said.

The funding would also “facilitate the financing of future spare engine acquisitions under Air France’s fleet renewal programme.” But the measure will not affect the group’s operations or workforce, it pledged.

The announcement comes less than a week after French shipping and logistics giant CMA CGM said it would acquire a stake of up to 9% in Air France-KLM as part of a long-term strategic partnership. The group has said previously that it plans to raise up to EUR4 billion (USD4.2 billion) to repay the state aid it received to combat the drop in demand during the pandemic, deploying bonds and a capital increase.

However, a deal with Apollo will not result in the private equity firm taking a stake in Air France-KLM and is “purely financial”, a spokesperson for the airline told Reuters. Revenue in this sale-and-leaseback deal involving engines will be generated by “giving Air France access to this spare engines pool”, a source involved in the matter elaborated to the news agency.

On behalf of KLM Royal Dutch Airlines (KL, Amsterdam Schiphol), the Dutch finance ministry, a shareholder in the group, told Reuters that it backed the talks: “Attracting private investors is good for the financial position of the company. We have a common interest that it frees itself of state aid.”

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