Air France-KLM and private equity firm Apollo Global Management announced on November 30 that they had completed the transaction for a total amount of EUR1.5 billion euros (USD1.63 billion) in financing for a dedicated operating affiliate of the Air France (AF, Paris CDG) and KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) parent.
The move followed the signing on October 26 of a definitive agreement between the parties, which in turn followed an initial announcement about the funding talks in late July. That explained that the quasi-equity financing is for a new subsidiary that “will hold the trademark and most of the commercial partner contracts related to Air France and KLM Royal Dutch Airlines’ joint loyalty programme Flying Blue.”
The latest statement said that the financing is accounted for as equity under International Financial Reporting Standards (IFRS), and “as announced by Air France-KLM during its Q3 2023 results, this outcome materialises the steps implemented by the group to restore its IFRS equity to positive by year-end.”
Apollo will subscribe to perpetual bonds issued by the new affiliate bearing an interest rate of 6.4% for the first four years, with the right for Air France-KLM to redeem them after that period.
“The agreed structure will incur no material changes for Flying Blue members,” the announcement stressed. “Air France-KLM will continue managing and operating the loyalty programme, and Air France and KLM will each keep full control of the Flying Blue customer database. In addition, the financing structure will not affect social aspects for Air France, KLM, or Air France-KLM employee contracts.”
In July, before the talks on the above funding were revealed, Apollo Global Management confirmed that “Apollo funds, affiliates, and clients” had committed EUR1 billion (USD1.1 billion) to the company in total. That was when a capital injection had been agreed via the MRO unit Air France Industries-KLM Engineering & Maintenance.
