Current market value in Paris Air France-KLM launches capital increase of 2.26 billion euros – 24/05/2022 at 11:00

(AOF) – Air France-KLM (-6.99% to 4.04 euros) has just announced the launch of a capital increase aimed at raising 2.256 billion euros. For example, the Franco-Dutch airline wants to continue to strengthen its balance sheet and accelerate the repayment of the state aid received in order to get through the Covid crisis. The transaction will result in the issuance of 1,928 million shares at a subscription price per unit of EUR 1.17. This represents a 73% discount from Monday’s closing price.

Air France-KLM’s major shareholders currently include the French state (28.6% of the capital), the company China Eastern Airlines (9.6%), the Dutch state (9.3%) and Delta Air Lines ( 5.8%).

The French and Dutch States intend to participate in the operation in order to maintain their level of participation. However, the Dutch state will have to get the green light from the House of Representatives.

At the same time, CMA CGM is joining as a new reference shareholder. The shipowner of Marseille has agreed to subscribe to the operation for an amount of up to 400 million euros within the limit of a maximum of 9% of the capital.

As for China Eastern Airlines and Delta Air Lines, they will simply reinvest the proceeds from the sale of their Preferential Subscription Rights (DPS) to CMA CGM. The two airlines should therefore see their interests diluted.

“The operation we are launching today is the result of the work we have been doing for several months to consolidate our balance sheet and strengthen our financial autonomy. It will also help the company regain its strategic latitude,” said Benjamin Smith. , CEO of Air France-KLM.

Air France-KLM had previously said it was working on measures to strengthen its capital, as part of a plan that could cost up to 4 billion euros. Among the assets under consideration, the group cited a capital increase, the issuance of quasi-equity instruments such as simple and convertible perpetual bonds, and the refinancing of assets.

As a first approach, UBS maintained its neutral view and its price target of EUR 4.15 on the Air France-KLM share.

AOF – MORE INFORMATION

Most important points:

– European number 1 in air transport, born in 2000 from the merger between Air France, founded in 1933, and the Dutch KLM, founded in 1019;

– Turnover of €14.3 billion realized 86% in passenger transport and freight, then maintenance for 7% and subsidiary Transivia for 7%;

– Business model based on optimizing fleet utilization, improving operational performance, simplifying structures and connectivity on the one hand, expanding the short- and medium-haul network and developing long-haul alliance flights (19 airlines alliance in SkyTeam ) and partnerships ;

– Capital owned 28.6% by the French state, 9.3% by the Dutch state, 8.8% by Delta Airlines, 8.8% by China Airlines and 3.7% by employees, Anne-Marie Couderc chairs the board of 19 directors, Benjamin Smith is general manager;

– Tense balance sheet situation with net debt of €8.2 billion, ie leverage of 11, but expected capital increase to €4 billion by the end of 2022.

Challenges

– Transformation strategy through organisation, cost reduction, fleet management and transfer to Transavia of the French domestic network excluding Marseille, Nice and Toulouse: debt ratio reduced to 3-3.5% in 2023, operating margin from 7 to 8% in 2024;

– Innovation strategy: at the service of the attentive relationship with the customer (large-scale use of voice assistant techniques, artificial intelligence, blockchain and augmented reality), towards clean aviation, support for sustainable fuels, electric taxiing for ground towing, atmosphere monitoring…;

– Environmental strategy with the aim of reducing CO2 emissions by 50% (vs. 2005): Climate plan with 6 priorities including fleet modernization (€2.5 billion invested in aircraft that consume 25% less fuel), sustainable fuels based on from SkyNRG, compensation plan with the CORSIA system / noise pollution control, / 60% recycling of hazardous waste by 2020 and reduction, by 2030, of residual waste by half and commitment to biodiversity;

– Continued success of Transavia – expected return of seat occupancy above 2019 level.

Challenges

– No return to 2019 traffic levels before 2024-25 and uncertainties about the reopening of Chinese airports;

– Benefits of strengthening partnership, industrial and capitalist, with China Eastern;

– Resistance to the rise of competition in maintenance;

– Outlook for 2022, after the return to operating profitability in Q1: for Q2: capacity offered in seat kilometers for the networks at 80-85% vs 2019 and break-even operating profit / for Q3, capacity in seat -km from 85 to 90% and clearly positive operating result

– No dividend payment in 2021 (for the 7th consecutive year).

A future reduction in the number of journeys

According to a study by Roland Berger, personal and professional air travel could drop by 20% once the crises are over. This negative trend is the result of environmental concerns. l

Passengers should choose more environmentally friendly airlines

† This approach is an extension of the movement



fly ”



“the shame of flying”, born in Scandinavia shortly before the start of the pandemic. The development of virtual mobility will also drive the decline in travel, which will be greater for business travel (around 21% to 24%) than for personal travel (14% to 20%). According to the study, long distance will not return to 2019 levels until 2026.

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