State aid: Commission approves up to €1.4 billion French aid measure to compensate Air France for the damage suffered due to the coronavirus pandemic

The European Commission has found a French support measure of up to €1.4 billion in favour of Air France to be in line with EU State aid rules. The measure aims at compensating the airline for the damage suffered between 17 March and 30 June 2020 due to the coronavirus pandemic and the travel restrictions in place to limit the spread of the virus.

Air France is a major network airline operating in France. It is owned by the Air France-KLM Holding company, in which the French state holds a 28.6% participation. With a fleet of over 300 planes, Air France plays a very important role in the French economy, in terms of employment and connectivity for many French regions including those overseas (Départements et Régions d'outre-mer “DOM-TOM”).

The French support measure

France notified to the Commission an aid measure of up to €1.4 billion to compensate Air France for damages suffered between 17 March and 30 June 2020 as a direct result of the travel restrictions in place in France and other countries to limit the spread of the coronavirus. Because of these travel restrictions in place, the airline incurred significant operating losses and experienced a steep decline in traffic and profitability over this period.

This measure follows (i) €7 billion liquidity support for Air France that the Commission approved on 4 May 2020 (SA.57082); and (ii) a €4 billion measure to recapitalise the airline that the Commission approved on 6 April 2021 (SA.59913).

The aid will be granted in several tranches and may take the forms of grants, equity support or liquidity support.

The Commission assessed the measure under Article 107(2)(b) TFEU, which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or sectors for the damage directly caused by exceptional occurrences, such as the coronavirus outbreak. The Commission found in particular that the French measure will make good the damage that is directly linked to the coronavirus outbreak. It also found the measure to be proportionate, as the compensation does not exceed what is necessary to make good the damage.

On this basis, the Commission concluded that the French damage compensation measure is in line with EU State aid rules.