Ryanair says Air France bailout to hurt competition for decades

Ryanair has blasted a €4bn bailout package that will leave the French government as the biggest shareholder in Air France-KLM, saying it will damage competition in the air transport market for decades.

Eighteen slots at Paris Orly airport that Air France must give up as a condition of the deal “is nowhere near enough” to allow others challenge the French airline’s dominance of Paris, Ryanair said.

The French government will contribute to a €4bn recapitalisation of Air France-KLM and more than double its stake to nearly 30pc, under plans announced yesterday with European Union approval.

The move is the latest by a major airline group to shore up finances after more than a year of Covid-19 travel shutdowns and deep losses for the sector.

France will convert a €3bn loan granted last year into a perpetual hybrid bond instrument and subscribe to a €1bn share issue, raising its stake in Air France-KLM from the current 14.3pc.

“This will make the state Air France’s biggest shareholder,” Finance Minister Bruno Le Maire said, describing the step as a “sign of commitment” to the airline and its workers.

The agreed conditions require France to find a “credible exit strategy” within a year and cut its shareholding to pre-crisis levels by 2027.

Air France will also give up 18 Paris-Orly take-off and landing slots to competitors, amounting to 4pc of its current portfolio at the airport.

But the reallocation will be restricted to Orly-based rival aircraft with crews employed on local contracts – freezing out Irish and other European airlines.

That will shield a planned expansion of Air France’s own budget carrier Transavia from “unfair competition”, Air France-KLM chief executive Ben Smith told reporters yesterday.

“This latest tranche of state aid to Air France combined with these ineffective remedies will damage competition in the air transport market for decades to come,” the Irish airline said.

The restrictions on slot reallocation were “one of the sticking points” in drawn-out talks with Brussels, Mr Le Maire said. “We do not want any social dumping.”

Other measures include the extension of state guarantees on €4bn in bank lending to Air France-KLM.

The bailout is the closest a major European carrier has come to renationalisation, after Germany took a 16.7pc Lufthansa holding as part of its rescue package.

The Netherlands, which bought 14pc of Air France-KLM in 2019 to counter French influence, will not join the capital hike – breaking a governance stalemate at the group while potentially adding to break-up pressures from some Dutch political quarters.

The likely dilution of the Dutch government’s stake to 9.3pc “has no consequences for the protection of public interests”, Dutch Finance Minister Wopke Hoekstra told lawmakers yesterday.

Dutch officials are in separate talks with Brussels over KLM that is likely to also entail conversion of the state’s €1bn loan into hybrid debt.

Additional reporting: Reuters

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