Air France-KLM has turned to its maintenance operations and private equity once again to raise additional financing for the group.

The group has entered exclusive negotiations with Apollo Global Management for the latter to invest €500 million ($548 million) into a dedicated operating affiliate of Air France that owns spare components.

This financing would be non-dilutive, structured through a quasi-equity financing instrument, similar to the one raised by Air France on a pool of spare engines in July 2022.

In that transaction, Apollo-managed funds subscribed to €500 million of perpetual bonds issued by an ad hoc operating affiliate of Air France-KLM that owns spare engines.

The proceeds of the 2022 financing were used to repay French state aid, whereas the latest proposed funding would be used for general corporate purposes.

The contemplated structure related to this financing would involve no change in the way Air France utilizes the spare components, and no impact on Air France or Air France-KLM employees’ contracts.

In the first quarter of 2023, Air France-KLM Engineering and Maintenance (AFI KLM E&M) recorded 11% higher revenue than the year-ago period, up to €926 million, while third-party sales rose 24% to €370 million.

Similar to the first-quarter performance of rival Lufthansa Technik, AFI KLM E&M reported that costs rose ahead of revenues.

“Revenue growth was hampered by supply chain disruption, in particular on the GE90 engine. Staff costs increased mainly due to the furlough contribution last year,” stated Air France-KLM.

The maintenance arm’s operating profit was €15 million, €32 million lower than the previous year on a constant currency basis.