European commission agreed to €3.4 billion KLM bailout
The European Commission has approved, under EU State aid rules, a €3.4 billion Dutch aid measure consisting of a State guarantee on loans and a subordinated State loan to KLM to provide urgent liquidity to the company in the context of the coronavirus outbreak. The measures were approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “KLM plays a key role for the Dutch economy in terms of employment and air connectivity. The crisis has hit the aviation sector particularly hard. This €3.4 billion State guarantee and State loan will provide KLM with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak. The Netherlands imposed certain conditions on the aid measure with respect to profit allocation, working conditions and sustainability. Very good. Member States are free to design measures in line with their policy objectives and EU rules.”
KLM is a major network airline operating in the Netherlands. It is part of the Air France-KLM group, in which the Dutch state holds a participation. KLM is the Netherlands’ second-largest private employer with over 36,600 employees. KLM is also a very important company for the Dutch economy, as it ensures the connectivity of the Netherlands with many destinations in Europe, with the Dutch regions overseas and the rest of the world. Since the start of the coronavirus outbreak, KLM has also played an essential role in the repatriation of citizens and for the transport of medical equipment.
As a result of the imposition of travel restrictions introduced by the Netherlands and by many destination countries to limit the spread of the coronavirus, KLM has suffered a significant reduction of its services, which resulted in high operating losses. Since the gradual easing of restrictive measures, as of the beginning of June 2020, air passenger traffic is slowly recovering. KLM does not have sufficient liquidity in order to finance the ramp up of its activities. Therefore, the support from the Dutch State is essential to obtain vital liquidity to face this difficult period. The Netherlands has also demonstrated that all other potential means to obtain liquidity on the markets have already been explored and exhausted.
When the deal was first announced, Ryanair’s CEO, Michael O’Leary called on the EU to block it, describing the bailout as “subsidy doping”. He said that it would reduce competition and consumer choice in the French and Dutch air markets. In a statement, the Commission said that the rescue package was “essential” for the airline to “obtain vital liquidity” during the ongoing coronavirus crisis, according to CITY A.M.
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