Air France-KLM Issues First Sustainability-Linked Bond
PARIS—Air France-KLM said the proceeds of its first sustainability-linked bond, whose coupons will be indexed on its emissions reduction target, attracted strong investor interest with a nominal amount of €1 billion ($1.07 billion), and an order book of around €2.6 billion.
The airline group said the bond issue was the first public sustainability-linked bond issuance in euros in the airline sector. As airlines work toward increasingly stringent environmental targets, financing is expected to be linked more and more closely with sustainability credentials.
The proceeds of the issuance will be used to redeem more of the state loan the airline received in May 2020 at the height of the coronavirus pandemic, Air France-KLM said.
The bond’s coupons will be indexed on Air France-KLM’s group target to reduce well-to-wake scope 1 and 3 jet fuel greenhouse gas emissions by 10% per revenue-ton-kilometer by 2025 versus 2019, as part of its broader decarbonization plan.
The offering is made up of two €500 million tranches, one with a 3.3-year maturity and a coupon of 7.250% and the other with a 5.3 maturity and an 8.125% coupon.
“The transaction will smooth Air France-KLM’s debt redemption profile over the coming years and provide additional leeway for the company to deliver on its sustainable transformation plan, including the renewal of its fleet,” Air France-KLM said.
“This inaugural transaction links the company’s financial strategy with its environmental objectives and represents an additional milestone in Air France-KLM’s ambition to achieve its decarbonization targets, as a leader for a more sustainable aviation industry,” the company said.
Air France-KLM and the group’s airlines are aiming to reduce well-to-wake scope 1 and 3 jet fuel greenhouse gas emissions by 30% per RTK by 2030 compared to 2019.
The airline group has opted to have its sustainability targets verified by the Science Based Targets initiative (SBTi). In December 2022, the SBTi approved the group’s scope 1 and scope 3 emissions reduction targets and confirmed that they are in line with a well-below 2°C objective, as determined by the Paris Agreement signed in 2015.