Netherlands Pledges Up To $4.4B Aid For KLM Amid COVID-19 Crisis

The Dutch government plans to provide €2-4 billion ($2.2-4.4 billion) in COVID-19 crisis-related financial assistance to KLM, following on France’s pledged €7 billion to help Air France and the Air France-KLM group.

“The precise structure of the support, which is expected to consist of a guarantee and a loan, is currently being worked out,” the Dutch government said in a statement.

Conditions have been attached to the financing package including an understanding that Air France-KLM and its two main subsidiaries, Air France and KLM, “take measures, to be set out in a restructuring plan, to ensure they will be able to continue playing a significant role in what is a highly competitive international aviation market,” the Dutch government said.

Air France-KLM CEO Ben Smith—who took over the helm at the group in September 2018 with the mission of improving its performance and narrowing the profitability gap with its peers—had already set out a restructuring plan in November 2019.

After France’s government announced its own financial help for the group on April 24, Smith said the aid was not a blank check. “Faced with the upheaval the world is going through we are going to have to rethink our model immediately,” he told staff in a video message. 

Smith said the group’s transformation would now work towards the single priority of regaining economic and financial security as quickly as possible “in order to survive in this ferociously competitive marketplace in which we operate.” 

He also pledged to focus on environmental transformation, reflecting wider calls for state aid to airlines to be contingent on greater efforts to improve sustainability.

KLM will also not be able to pay dividends or award bonuses for the duration of the financial assistance, while the government will ask staff to take a pay cut “with the highest earners making the largest contribution,” the Dutch government said.

“KLM will also have to make a contribution in terms of sustainability and nuisance reduction, for example by cutting back the number of night flights,” the government added.

France owns 14.3% of Air France-KLM and the Netherlands has held 14% since 2019, when it controversially took a stake to make sure its voice was heard on strategic decisions about the group. The two governments were in “intensive contact” in recent weeks about what financial support should be put in place, the Dutch government said. 

“We’ve always said we will do everything it takes to help Air France-KLM through this crisis. Schiphol airport and its main user KLM are vital to the Dutch economy and employment,” Dutch finance minister Wopke Hoekstra said.