KLM’s coronavirus bailout still waits for takeoff

KLM could go bankrupt by mid-June. [Photo: StudioPortoSabbia]

The Dutch government’s proposed €2-4 billion aid package for national airline KLM was debated in parliament on Wednesday (6 May), but lawmakers are still divided over what strings – if any – to attach to the bailout.

Dutch politicians suggested a number of diverse conditions that the airline would have to meet to get its hands on public money, ranging from a moratorium on bonuses and dividend payouts to deeper emission cuts and a ban on transporting livestock by air.

Finance Minister Wopke Hoekstra had already announced on 24 April that the government would not issue an unconditional bailout, suggesting that beefed up sustainability criteria and management restructuring would be part of the deal.

But on Wednesday Hoekstra struck a more cautious tone, telling lawmakers that KLM will go bankrupt by mid-June if “major action” is not taken soon, although the minister did warn that a final agreement could take months to finalise.

The airline grounded much of its fleet because of virus lockdown measures but has in recent days started to resume some routes. Up to 2,000 jobs could be cut by the end of the second quarter because of the massive slump in demand for air travel.

Environmental groups have called for airline state aid to be linked to stronger climate targets, a step that the Austrian government has indicated it will take when granting money to its national carrier, but KLM might get off lightly in that regard.

Austrian Airlines bailout to be linked to climate targets

Coronavirus state aid for Austrian Airlines should support efforts to cut aviation’s carbon footprint, the Alpine republic’s environment minister said on Thursday (16 April), as the government negotiates with the firm’s parent company, Lufthansa.

Roald van der Linde, a lawmaker with Prime Minister Mark Rutte’s conservative-liberal VVD party, warned that “we should not make demands of KLM that other airlines do not have to comply with”.

Other MPs like Erik Ronnes from Christian Democratic Appeal (CDA) party, were more straightforward, saying: “it is not the time for sustainability wishlists”.

Lawmakers did not dismiss Hoekstra’s initial proposal to reduce the number of night flights and tackling noise pollution but members of the four-party-strong coalition said that new environmental measures should not be imposed all at once.

Party for the Animals MP Lammert van Raan, however, was insistent on green strings, warning that “aviation has no future prospects at all if it is not going to become much more sustainable”.

Other leftwing parties such as GroenLinks said that measures like fuel taxation and replacement of short-haul flights with train travel should be part of the agreement, although they are not likely to get political backing in the ongoing negotiations.

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Europe’s demand for rail travel will increase over the next decade, according to new analysis that cites the public’s new-found appreciation for cleaner air and climate issues as a result of the virus outbreak. Airlines are predicted to be the main loser of the train resurgence.

Van Raan also mentioned the criteria set by the French government for its €7bn Air France bailout, which imposes a target of 50% emission cuts by 2030 and 50% on domestic flights by 2024.

Air France and KLM are part of the same commercial group, the result of a merger between the two airlines in 2004. Tensions are currently building within the alliance, after French unions criticised their Dutch counterparts on Monday (4 May).

Last week, the head of KLM’s worker council, Dario Fucci, said that the group’s agreement would need a rethink in the wake of the French government’s bailout announcement. “We want to buy fuel and sell tickets together, but that’s the end of it,” Dutch media quoted him as saying.

The unions replied in an open letter that “it’s an illusion to think KLM would fare better without Air France”, adding that “when Air France bought KLM in 2004, KLM was nearly bankrupt”.

Air France-KLM gets virus bailout, green conditions still pending

Air France-KLM will get a state-backed bailout of around €10 billion in loans and guarantees. But the lack of strict conditions in the aid packages announced by the French and Dutch governments on Friday (24 April) has already stoked criticism.

(Edited by Frédéric Simon)

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