Air France-KLM vowed to expand low-cost and transatlantic flights after raising 2.26 billion euros ($2.4 billion) in a deeply discounted share sale to repay a chunk of the state aid that helped the carrier survive the Covid-19 pandemic.

The proceeds of the rights issue started last month will be used to reduce debt and reimburse about 1.7 billion euros of bonds issued last year and held by the French government, the Franco-Dutch airline said Tuesday.

The operation “helps us to reimburse a big portion of the aid, which is a good thing,” Chief Executive Officer Ben Smith said in an interview on BFM radio. The carrier will now be able to execute its strategy, he added.

“Our entire fleet will be working this summer,” Smith said. “We’ve decided to go very, very hard on transatlantic, even more than before the crisis.” Air France-KLM is adding planes to its budget Transavia arm to challenge competitors like EasyJet Plc, while pushing the Air France brand to the higher end of the market, he said. 

The stock fell as much as 13% in Paris to 1.30 euros, a record low. The new shares were sold at a subscription price of 1.17 euros each, or a discount of about 73% to the May 20 close—before the start of the offering period. 

The transaction brings Air France-KLM closer to completing a targeted 4 billion-euro capital increase as it seeks to pay down borrowings in line with European Union requirements on state funding, which limit the airline from participating in the consolidation of an industry roiled by the Covid-19 crisis.

Air France-KLM has been linked to one of two bidding groups for Italia Trasporto Aereo, the successor to failed Italian airline Alitalia SpA. While Smith has cautioned the carrier has been burned before on investments in the predecessor to the Italian airline, he said on Tuesday the group will consider any outside opportunities after the rights issue. 

Government Stakes

Like other European airlines, the firm is adding capacity as the removal of Covid travel curbs triggers a surge in bookings. At the same time, carriers remain wary of bottlenecks at major airports and prospects beyond the summer as inflationary pressures add to costs and weigh on consumer spending.

Air France and KLM have been forced to cancel flights in recent weeks due to strikes and labor shortages at Paris-Charles de Gaulle and Schiphol airports. Another staff walkout is planned at the French capital’s hub on July 2. 

The operation allowed French shipping giant CMA CGM SA to take a 9% stake in the carrier as part of an air-cargo alliance announced last month, giving it a seat on the board. 

The entrance of CMA CGM will allow the carrier to better benefit from a “structural change in the air cargo market” triggered by the health crisis, Smith said in the radio interview.  “We are thrilled to have such a well-run company with formidable ambitions” as an investor, he said.

France participated in the rights issue and kept its shareholding at 28.6%. The Dutch government retained its 9.3% stake.   

China Eastern Airlines Corp. and Delta Air Lines Inc. saw their stakes lowered to 4.7% and 2.9% as they committed to participate in the rights issue on a cash neutral basis, selling some of their subscription rights to CMA CGM.

As part of its efforts to raise capital, Air France-KLM also said last month it’s in talks with Apollo Global Management Inc. for a 500 million-euro capital injection into an Air France unit affiliate that owns a pool of spare jetliner engines used in its maintenance operations.