The French government has reached a deal with the European Commission allowing it to inject fresh money into flagship airline Air France, it said on Sunday, as the airline’s finances creak under the effects of COVID-19 restrictions
The agreement follows weeks of negotiations with the EU’s executive, which must ensure that state aid does not give companies an unfair advantage.
“We have an outline agreement with European Commissioner Margrethe Vestager about new financial aid for Air France,” French Minister of Finance Bruno Le Maire said on the RTL political broadcast Le Grand Jury.
Air France, of which the French government owns 14.3 percent, will have to give up “a certain number” of slots at Orly, Paris’ second-largest airport after the Charles de Gaulle airport, in return for the green light from Brussels, Le Maire said.
Air France posted a 7.1 billion euro (US$8.34 billion) loss last year as its business, like those of the rest of the world’s airlines, was affected by restrictions which all but grounded global air traffic.
Le Maire would not be drawn on the amount of new funds to be given Air France, saying this was part of discussions to be held with the airline, whose board needs to vote on the deal and was to meet today.
The agreement with the Commission was “very good news for Air France and for the whole French aviation sector,” Le Maire said, adding that negotiations had been “tough.”
The minister declined to say how many slots at Orly Air France would have to give up, but said it would be fewer than the 24 that the commission had initially asked for.
The French government has already given “a lot of help” to Air France to weather the COVID-19 crisis with an initial sum of 7 billion euros and would “not sign a blank check” this time around, Le Maire said.
“There are tens of thousands of jobs involved. Air France is strategic for our country,” he said.
The carrier must become more competitive and continue to reduce carbon emissions, he said.
“The taxpayer is making an effort, and Air France must also make an effort,” Le Maire added.
A European Commission spokesperson said that the executive was in contact with the French government but could not “predict the timing or outcome of these contacts.”
According to EU rules, any government granting more than 250 million euros in aid to a company with “significant market power” had to propose additional measures to safeguard competition, the spokesperson said.
Any fresh capital for Air France would be scrutinized not only by the EU, but also by the carrier’s competitors, which want to make sure that the playing field remains level.
The Air France plan comes as France faces rising deficits and debt because of a weaker economic rebound than hoped.
The annual deficit, which has spiraled as French President Emmanuel Macron’s government tries to prop up the struggling economy with massive spending, is expected to reach 9 percent of GDP this year, Le Maire said.
This compares with an 8.5 percent estimate included in the government’s budget plan for this year, and a three percent deficit limit that EU members must usually respect, but have swept aside as they deal with COVID-19.
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