The coronavirus crisis shook the European aviation sector and opened the door to negotiations on state aid, which involved agreements with the European Commission, to airlines.
Two of the three main European airlines, the German Lufthansa and the French-Dutch Air France KLM, have already had authorization from Brussels to be saved from insolvency, but the agreed conditions were strict. In the case of Lufthansa, the European Commission authorized Germany to become a temporary shareholder in the airline and, in the case of French and Dutch State aid, Brussels imposed a reduction in flights, a limitation of wages and the pursuit of environmental targets.
In Italy, the historic Alitalia, which last week had only 232 million euros in the bank, the situation remains difficult, after years without profit. Roma intends to inject three billion euros to create a new Alitalia, 'pushing' the liabilities to an insolvency manager, in a process aimed at renationalizing the company.
Brussels imposed a condition that TAP return the State loan of up to 1,2 billion euros over a six-month period. But negotiations between the State, which holds a 50% stake in the national airline through Parpública, and Atlantic Gateway shareholders, David Neeleman and Humberto Pedrosa, with a 45% stake, have put the 'ghost' of nationalization in on the table.
TAP: 90 million separate nationalization from emergency loan
The outcome on TAP's future may be for hours. After the Prime Minister, António Costa, have shown confidence in an agreement between the State and TAP's private shareholders on the EUR 1,2 billion emergency loan, which has already been got the green light from the European Commission, Carlos César, president of the PS, hit with the foot. Yesterday he said that if the agreement was not possible, "what we have to do is to approve tomorrow [today] in the council of ministers the decree nationalization law that is already prepared".
JE reported first-hand that there are 90 million separating the loan agreement from the nationalization decree. The State does not abdicate that Azul, a company that is TAP's bondholder, waives the right to convert the 90 million loan, made in 2016, into capital.
David Neeleman, owner of Atlantic Gateway with Humberto Pedrosa, has already agreed to leave TAP for an amount between 45 million to 55 million euros. But Azul's shareholder also needs the agreement of the other shareholders of this airline to agree to convert that loan into equity.
The JE also found that emergency aid of 1,2 billion euros, without nationalization, could change the shareholder structure, with a new reconfiguration of capital. The State would become the majority shareholder, holding 72,5%, Humberto Pedrosa remained in the capital, with a position of 22,5%, and the remaining 5% would remain in the hands of the workers of the national airline.
Brussels imposes temporary German participation in Lufthansa
At an extraordinary general meeting held over the internet, Lufthansa shareholders approved the German federal government's € XNUMX billion rescue package to avoid the airline's bankruptcy, which involves a € XNUMX billion loan for a recapitalization program. of six million euros, the latter approved by the European Commission the day before.
The recapitalization will be carried out through the Economic Stabilization Fund, which was created by the German government to provide financial support to companies affected by the coronavirus crisis and contains tight rules on the use of funds, as well as incentive mechanisms for leaving Germany's capital from Lufthansa .
On the one hand, Germany, through the Economic Stabilization Fund Fund, participates directly in the capital of the airline, by subscribing to new shares issued in the amount of 300 million euros - at 2,56 euros each - and representing 20% of Lufthansa's share capital.
On the other hand, Germany will have 'silent stakes' in the airline. Thus, the government lends EUR 5 billion to Lufthansa, a debt that can be converted into capital - only and only in the case of an unsolicited offer, reinforcing Germany's capital by an additional 4,7% of the capital and one more share, in order to remain with a minority blocking position - and there is an injection of XNUMX billion euros that cannot be converted into capital.
Brussels imposed that Germany must be “sufficiently” remunerated for the investment made and further determined, in the light of competition rules, that Lufthansa give up 24 slots per day in the airport infrastructure in Frankfurt and Munich, where the airline has “significant” market power. Magrethe Vestager, European Commissioner for Competition, explained that "this gives chances to competing airlines to enter these markets, ensuring fair prices and increased choice for European consumers".
According to the business plan formulated by the airline, Lufthansa has until 2026 to repay the loan and the recapitalization measures, with Germany committed to developing an exit strategy from Lufthansa during the 12 months following the recapitalization of the company, unless, until then, Germany's participation in the capital is reduced to less than 25%.
Until Germany ceases to have a shareholding position in the company, Lufthansa cannot distribute dividends nor can it buy back shares (share buyback). In addition, until the return of 75% of the recapitalization amount, management remuneration is “strictly” limited, which includes a ban on the payment of bonuses, in addition to the fact that the company cannot acquire stakes greater than 10% in other airlines. .
In operational terms, it is expected that a reduction of 100 aircraft and a reduction in working hours and employee salaries. Carsten Spohr, chairman and CEO of Lufthansa, said that he intends to avoid the dismissal of 22 thousand people by reducing working hours and salaries for employees.
State aid to Air France-KLM: fewer flights, fewer employees and less CO2 emissions
Air France-KLM, 14,3% owned by France and 14% by the Netherlands, will receive state aid totaling 10,4 billion euros.
Air France will receive seven billion euros from the French state, having already received the green light from Brussels, a measure that emerged after all forms of obtaining liquidity through market operations were exhausted.
The injection of liquidity into Air France will be done through two loan lines. The one with the highest amount, of four billion euros, has guarantees from the French State up to 90%, and will have a maximum duration of six years. Brussels accepted this loan with state guarantees of up to 90% because, among other conditions, interest increases over the life of the loan, which is an incentive to prepay.
The other loan is made directly to shareholders in the amount of three billion euros.
There were, however, counterparts to the loan. Air France will have to reduce CO2 emissions on domestic flights by 2024, which will be reduced by 40%, renew the fleet and reach the goal of 2% of alternative fuels that are durable by 2025.
According to "Bloomberg", the CEO of Air France-KLM, Benjamin Smith, intends to reduce 8.300 employees through voluntary terminations, having started negotiations with the unions for this purpose.
On the Dutch side, KLM will receive € 3,4 billion in state aid. The board of directors of the Dutch airline has approved state support, which unfolds under a credit line of 2,4 billion euros with bank guarantees and XNUMX billion euros in direct financing from the Dutch government.
In return, KLM will not pay dividends and will have to reduce wages by 20% for employees who receive more than 11 thousand euros per year and limit the payment of bonuses. The airline will also have to cut the number of flights by 20% in order to reduce noise in Amsterdam, a measure that aims to boost train travel.
In addition, the Dutch airline will also have to reduce CO50 emissions per passenger by 2% by 2030.
Alitalia with nationalization in sight?
About a week ago, Italian Industry Minister Stefano Patuanelli said that Alitalia had 232 million euros in the bank. The financial problems of the Italian airline are not new - it does not report positive net results since the turn into the new millennium -, but they were exacerbated with the measures of confinement, closing of borders and restrictions on flights.
In May, Rome announced that it would inject three billion euros in capital into the airline to make it a new public company, after having already injected 400 million euros at the beginning of the year and never having received the 900 million loan. euros in 2017.
The Italian government plans to create a new company that would absorb only Alitalia's assets. According to recent statements by the industry minister, the new Alitalia's business model would focus on long-haul flights, with a fleet of around 100 aircraft, which may include the assets of another airline, Air Italy.
However, the renationalization of the airline may come up against Brussels, not only due to competition reasons - Magrethe Vestager said that "the economy will resume" - but also because of the financial problems that have affected Alitalia for many years.