KLM has secured €3.4 billion in funding from the Dutch government and banks, adding to the €7 billion already secured by sister carrier Air France.
Dutch carrier KLM announced the aid, in the form of a loan and state-guaranteed credit facility today, saying: “The financing package is necessary to secure the long and difficult road of recovery.”
KLM chief executive Pieter Elbers said: “KLM is in an unprecedented crisis due to Covid-19. This is a very important step.
“With the financing package, we will be working on the restoration of the route network and on the development of the restructuring plan and the far-reaching conditions imposed on the package.”
The package consists of a revolving credit facility of €2.4 billion provided by 11 banks, 90% guaranteed by the state, and a direct state loan of €1 billion.
The credit facility is available for five years, with the loan to be repaid in 5.5 years.
Both are subject to “certain conditions imposed by the state”. These remain undisclosed, but KLM said it would “draw up a restructuring plan that meets these conditions and determines the path for post-Covid-19 recovery”.
The conditions include the “terms of employment of all KLM Group employees, the variable remuneration of management and top management, restructuring, dividends, governance, network quality and sustainability”.
Both the financing and the conditions are subject to Dutch parliamentary approval and the consent of the European Commission.
KLM and the Dutch government believe the terms of the aid comply with temporary state aid measures permitted by the EC.
However, Ryanair called on the EC to block the aid package, branding it “illegal”.
Michael O’Leary, Ryanair group chief executive, said: “Every Dutch citizen now has to pay €200 each to prop-up Air France-KLM, while each French citizen will only pay a subsidy of €100.
“We call on the EC to block this subsidy doping to KLM, which will reduce competition and consumer choice in the Dutch and French markets.”
Following approval by the Dutch parliament, KLM will use the first €665 million in credit to repay an existing revolving-credit facility drawn on March 19, when KLM also drew on a €277 million state loan.
Elbers said: “Once this approval has been obtained, KLM will consult with trade unions.”
Air France secured €7 billion in aid from the French government at the start of May through a loan and guaranteed bank loan.
KLM and Air France together comprise the Air France-KLM group.
Lufthansa this week secured shareholders’ agreement to a €9 billion bail-out by the German government.