June 26, 2020 / 2:33 AM / 8 days ago

Netherlands agrees to contribute 3.4 billion euros to Air France-KLM bailout

AMSTERDAM/PARIS (Reuters) - The Dutch government has reached a deal with France to contribute 3.4 billion euros (3.07 billion pounds) to an Air France-KLM bailout that had strained relations between the airline group’s state shareholders, sources told Reuters.

FILE PHOTO: Logo of Air France KLM Group is pictured on the first Air France airliner's Airbus A350 at the headquarters of Airbus in Colomiers near Toulouse, France, September 27, 2019. REUTERS/Regis Duvignau/File Photo

The agreement will see the Netherlands issue direct loans and guarantees to KLM and appoint a trustee to its board, two people with knowledge of the matter said.

Air France-KLM and the French finance ministry declined to comment, but the Dutch finance ministry later announced a Friday morning news conference to “detail the financial aid package for KLM”. A statement that briefly appeared on the group website also mentioned its 3.4 billion-euro value.

The governments, which each own about 14% of Air France-KLM, unveiled 7 billion euros in French aid in April and a planned 2 billion-4 billion euros from the Netherlands, as the coronavirus crisis brought air travel to a near-halt.

The Dutch funds have been held up by parliamentary scrutiny and by tense negotiations in which France rebuffed The Hague’s demands for a voting seat on the KLM board, which would have weakened the group’s hold on its Dutch subsidiary.

Instead, the agreement would involve the appointment of a non-voting government observer to ensure taxpayers’ bailout money is strictly reserved for KLM operations, the sources said.

The French and Dutch governments remain at loggerheads over management and strategy at Air France-KLM, created by the 2004 merger between the two national carriers.

Frustrations exploded in March last year with the Dutch state’s surprise acquisition of a stake in the group, designed to match France’s holding and counter its clout.

Prior to the pandemic, a specially convened intergovernmental group had reported no progress on issues that included Dutch demands for board seats and greater KLM autonomy from its parent group.

But the KLM aid deal may also resolve parts of that stalemate, the sources said, after the subject came up in talks this week between French President Emmanuel Macron and Dutch Prime Minister Mark Rutte.

The Dutch aid package is also likely to come with environmental conditions and restrictions on executive pay demanded by lawmakers.

Reporting by Toby Sterling and Laurence Frost; additional reporting by Anthony Deutsch; Editing by Edmund Blair, Kirsten Donovan, Dan Grebler and Lincoln Feast

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