The deal comes after weeks of negotiations with the EU commission, which must ensure that state aid does not give companies an unfair advantage.
Air France posted a loss of € 7.1 billion in 2020 as its business, like that of the rest of the world’s airlines, suffered coronavirus restrictions that practically wiped out global air traffic.
In exchange for its green light, the commission, which is the EU’s antitrust regulator, said Air France would cede about 18 slots a day at Orly, the second-largest airport in Paris after Charles de Gaulle.
“This gives competing carriers the opportunity to expand their activities at this airport, ensuring fair prices and more choice for European consumers,” said EU Competition Commissioner Margrethe Vestager.
French Finance Minister Bruno Le Maire said the EU had also allowed the French state to increase its stake in the Air France-KLM group to 30 percent, up from the current 14.3 percent.
The Dutch flag carrier KLM, which forms an alliance with Air France, will not benefit from the aid.
However, the Dutch government welcomed the approval of additional aid.
In a joint statement, Le Maire and his Dutch counterpart Wopke Hoekstra said that a recapitalization of KLM by the Netherlands government was under consideration.
The recapitalization of Air France will be carried out by converting the loans it received from the French state last year into perpetual hybrid Air France-KLM bonds that can be converted into shares.
Air France-KLM shares fell 1.4 percent in Amsterdam and 1.6 percent in Paris, with both markets trading higher.
Independent aviation analyst John Strickland told AFP that “the competitors will not be happy and it is important to see that the slot solution proposed at Orly has real meaning in terms of facilitating additional services from the competition.”
Rival airline Ryanair, whose criticism of the state subsidy for traditional airlines often finds a sympathetic ear in the European Commission, has criticized previous French aid to Air France, saying it distorts competition.
The Ireland-based low-cost carrier has long been critical of the support given to national champions and is often backed by Brussels.
Ryanair, Europe’s largest airline in terms of passengers, is also trying to challenge Germany’s massive bailout of Lufthansa in EU courts, as well as schemes in Spain, the Netherlands, Denmark and Portugal.
The French and Dutch ministers defended their support for their airline group.
“The connectivity of France and the Netherlands is of great importance for both economies and therefore the recovery of Air France – KLM Group is the best for the two states,” they said in their statement.
They also noted that airlines have restructured to shore up their financial positions and are committed to accelerating their transition to environmental sustainability.
“It is not surprising to see increased government investment in Air France, but the key question is whether it will lead to attempts to impose political direction on the group’s management beyond its business objectives,” Strickland said.
The ministers said that France does not intend to increase its stake in the group and that there are no plans to nationalize the respective airlines.
European airlines hope that vaccination campaigns will be accelerated to allow for travel to resume before the summer holiday season, which is when they traditionally make most of their money, to help them recover financially.
George is Digismak’s reported cum editor with 13 years of experience in Journalism