Air France-KLM stock price struggles as carrier seeks emergency funding

Shares of Air France-KLM Group (EPA:AF), made modest gains this week, while the French airline is engaged in talks with the French government over an emergency multi-billion funding to survive the ongoing crisis. 

Fundamental analysis: Air France asks government for support

The national airline of France has requested several billions of euros of emergency funds from the national government, French business daily Les Echos reported today. 

Moreover, the carrier is in talks with banks over a 6 billion euro loan, which would be backed up by governments of France and Netherlands. The stumbling block has been France’s unwillingness to match Netherlands’ 90% level of guarantee for these loans, compared to 75% offered from Paris so far.  

The state aid is needed for Air France-KLM to survive the next few months after CEO Ben Smith said that his company eats through 25 million euros a day. If the vast majority of its planes continue to be grounded, Air France-KLM has money for less than three months to survive. 

These losses would be much bigger if Air France-KLM hadn’t already started using the government’s unemployment scheme, which is likely to help the carrier save more than 1 billion euros in 2020.

Yesterday, the French finance minister Bruno Le Maire promised strong support to Air France-KLM Group.

“We’re ready to step in and support Air France when the time comes, no doubt very soon,” Le Maire said on Europe 1 radio.

Two days ago, the carrier said it expects to have more than 90% of its planes grounded in the next two months after passenger numbers collapsed nearly 57% in March. Air France said that it will aim to maintain key routes from its two home hubs – Amsterdam-Schiphol et Paris-Charles-de-Gaulle.

Technical analysis: Buyers struggling to initiate a recovery 

Shares of Air France-KLM have dropped more than 60% since February to hit levels below €4 for the first time since 2012. The stock price has recovered modestly since mid-March, however that has been far for convincing. 

The bulls are now struggling to push above €5.50 in order to try and stage a rally targeting the key short-term resistance of €6.65, which had acted as a multi-year support for a long time. If, on the other hand, sellers continue to exercise control over the price action, then a move towards €4.60 seems very likely. 

The most bearish scenario includes a test of the key long-term support near the €3 mark, as €3.01 is the record high that Air France-KLM stock price has ever traded.

Summary

Shares of Air France-KLM have struggled to stage a recovery as the carrier is fighting for its survival. The French-Dutch airline eats through 25 million euros a day, hence, it is in urgent need of funds.