The European Commission on Monday approved French state aid worth €7 billion for Air France, saying the measure would provide urgent liquidity to the company in the context of the coronavirus outbreak.
The support was approved under the State aid Temporary Framework that the EU’s Executive Body adopted in March, in a bid to support the bloc’s economies from the COVID-19 economic impact.
“This €7 billion French guarantee and shareholder loan will provide Air France with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak,” said Margrethe Vestager, Executive Vice-President.
The Commission said the French flag carrier, with its fleet of over 300 planes, has had an essential role in repatriating citizens stranded abroad as well as in transporting medical equipment and highlighted its importance to the French economy.
The support will take the form of a state guarantee on loans and a subordinated shareholder loan to the company by the French state.
The aviation industry has been hard hit by the travel bans and lockdowns that have been put in place globally to curb the coronavirus pandemic. As a result, several European countries have pledged massive bailouts for the sector to save it from collapse.
Air France, which has reduced its flight capacity by up to 90% amid the COVID-19 crisis, would “likely face the risk of bankruptcy due to the sudden erosion of its business” the Commission said in its statement.
“The measure will contribute to managing the economic impact of the coronavirus in France. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State,” it concluded.