- The Dutch government agrees to provide 3.4 billion euros for its part of the Air France-KLM business
- 2.4 billion euros will be given in loans with guarantees, in addition to 1 billion euros in direct loans.
- Shares of the carrier soar 9% on the announcement, before retreating to trade 4% in the green
Shares of Air France-KLM (EPA: AF) soared 9% this morning after reports emerged that the Dutch government would provide 3.4 billion euros ($3.8 billion) for the Dutch part of the Air France-KLM business.
Fundamental analysis: KLM gets a bailout, Ryanair protests
The Dutch government has agreed to provide 3.4 billion euros ($3.8 billion) in aid for its part in the Air France-KLM business, Reuters reported. According to the agreement, 2.4 billion euros will be given in loans with guarantees, in addition to 1 billion euros in direct loans.
As a result, the embattled carrier will now receive more than 10 billion euros in aid, after the French government pledged 7 billion euros earlier.
“This package is needed to make sure that KLM and Air France can continue to fulfil the important role that they have in our economy,” Finance Minister Wopke Hoekstra said.
As a part of the deal, the Dutch government will send an observing member to KLM’s board. This way, they will make sure that the taxpayer money is only spent on the KLM, its flag carrier.
However, no additional control over the joint company will be provided to the Netherlands. According to reports, France rejected attempts from the Netherlands to get a set on the board.
The company is currently working on staff costs, with reports saying that around 20% of the total workforce will be affected.
“The goal is to keep as many jobs as possible, but we can’t close our eyes to the reality that the airline and industry is facing,” CEO Pieter Elbers said.
This news prompted Ryanair, the low-cost carrier, to call on the European Union to block the bailout package for the Dutch arm of Air France-KLM.
“We call on the European Commission to block this subsidy doping to KLM, which will further reduce competition and consumer choice in the Dutch and French markets. This Dutch government subsidy is also bad news for competition and consumer interests as it will further delay the necessary reforms at the bloated Air France-KLM,” Ryanair Group CEO Michael O’Leary said in a statement.
Technical analysis: Stock soars, but fails to hold on to early gains
Air France-KLM stock price initially soared 9% on the news before paring back gains to trade around 4% higher. The share price lost 65% in value since February, before recovering around half of these losses in May.
The buyers are now attempting to clear the horizontal resistance around the 4.60 mark. If successful, the next target is 5.40 which is the 100-DMA.
Shares of Air France-KLM jumped 9% on the news that the Dutch government would provide 3.4 billion euros for its part of the Air France-KLM business. The news prompted KLM’s competitor, Ryanair, to call on the European Union to block the bailout package.