Air France-KLM has repaid EUR300 million euros (USD325 million) of EUR600 million (USD650 million) in outstanding hybrid bonds held by the French state, marking a 75% redemption of the Covid-19 recapitalisation state aid it received.

In a statement, the group said it would refinance EUR320 million (USD347 million) through a new issuance of perpetual hybrid bonds to be issued by the French state, without any restrictions attached, as approved by the European Union's watchdog the European Commission on February 16, 2023.

The background to the Covid-19 state aid is as follows: In late May 2020, France granted a direct loan of EUR3 billion (USD3.25 billion) to Air France-KLM, which had suffered significant operating losses due to travel restrictions imposed by France and other countries following the outbreak of Covid-19.

In April 2021, the parties agreed to convert the loan into perpetual hybrid bonds as Covid recapitalisation aid to Air France and Air France-KLM. This was approved under state aid rules by the European Commission on condition that the French flag carrier give up some of its slots at congested Paris Orly where the airline holds a significant market share.

In 2022, the group repaid EUR2.4 billion (USD2.6 billion) of the EUR3 billion, leaving EUR600 million remaining.

As announced in the group’s FY2022 results, Air France-KLM and Air France intend to fully repay the recapitalisation aid on April 19, 2023.