The French government’s €7 billion state bailout of Air France-KLM has gained EU approval from Brussels.

The financial support package was approved under EU state aid rules. Air France-KLM is also seeking an additional aid package of between €2 billion and €4 billion from the Dutch government.

The Commission found that Air France was at risk of bankruptcy due to the drop in demand and significant reduction of its services as social distancing and flight restrictions continue to be imposed to contain the spread of the coronavirus pandemic. The potential loss of the carrier would likely cause “severe harm” to the French economy. Measures imposed to contain COVID-19 have resulted in high operating losses.

Loan will provide Air France with liquidity

Margrethe Vestager, who is in charge of EU competition policy, approved the French aid package. She said: “The aviation industry is important in terms of jobs and connectivity. In the context of the coronavirus outbreak, Air France has also been playing an essential role in the repatriation of citizens and for the transport of medical equipment.”

“This €7 billion French guarantee and shareholder loan will provide Air France with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak. We have co-operated closely with France, as with many other member states, to ensure that public support to tackle the current crisis can be put in place as quickly and effectively as possible, in line with EU rules. France has also announced plans for certain green policy choices as regards Air France.”

Last week, Ryanair chief Michael O’Leary attacked the decision by some European countries to give financial bailouts to their flag carriers as “unlawful and discriminatory,” warning of a potential legal challenge against the support packages.