Air France-KLM could soon be free to resume acquisitions as the carrier prepares to pay back billions of euros in state funds needed to withstand the Covid-19 pandemic.
The airline is planning to reimburse the rest of the cash owed to the Netherlands “within months” and 75% of French aid by the end of 2022, Chief Executive Officer Ben Smith said at a press conference Thursday in Paris. The moves would trigger a lifting of rules imposed by the European Union on bailout recipients, such as a ban on acquiring more than a 10% of a rival.
“We don’t want to be marginalized in Europe” due to restrictions on dealmaking, Smith said. The group has been linked to one of two bidding groups for Italia Trasporto Aereo, the successor to failed Italian airline Alitalia SpA.
The airline “is almost there” with repayment to the Netherlands, Smith said. “It’s just a question of whether we are comfortable to close all these credit lines against any future change in the situation.”
Air France-KLM’s plan is a further indication the industry is bouncing back from coronavirus travel bans as demand rises to pre-pandemic levels in some regions. The carrier is utilizing 90% of its 2019 capacity to meet a rush of tourists keen to enjoy their first summer holiday abroad in three years, and is operating its entire fleet, having pulled jets from Asian routes. About 300 pilots have been hired.
At the same time, Air France-KLM and rivals’ turnarounds have been hampered by severe airport disruptions and strikes in some countries due to staff shortages and wage demands, especially in European hubs like Amsterdam’s Schiphol.
Nearly four years after taking the helm, Smith said he remains confident the carrier’s decades-old legacy of labor strife has been curtailed. “Calming things down” with Air France’s 17 unions was his top priority when hired as the first foreign national to become CEO of the flag carrier, he said.
This will be tested as early as June 25 when one of Air France’s pilot unions is due to go on strike, which Smith said won’t have “any impact.” The carrier could also bear the brunt of a Paris airport staff walkout scheduled for July 2.
The carrier has raised ticket prices to reflect higher fuel costs and “inflation across the board” while still enjoying “very strong” demand, Smith said. “The ability to recoup and pass on higher costs to customers is unbelievable.”
Air France-KLM is benefitting from Paris’s position as a top tourist destination for affluent travelers willing to splash out on business and first-class seats, he said. Air France’s La Premiere is sold out on transatlantic flights for the next couple of weeks.
“Try to get a seat out of New York—it’s impossible,” he said, also citing a run on first-class tickets to Los Angeles at 17,000 euros ($17,872) each.