World Trade

Air France-KLM is in discussions with Apollo for a 500 million euro capital infusion.

PARIS : Air France-KLM announced on Friday that it has entered into exclusive discussions with private equity company Apollo for a 500 million euro ($529 million) capital injection for one of its engineering and maintenance operations to assist in repaying French state subsidy.

“The profits of the deal would allow Air France-KLM and Air France to partially redeem the French government’s perpetual bonds,” the airline stated, adding that there would be no operational or personnel-related adjustments.

The current market capitalization of the airline is 2.73 billion euros.

A representative for Air France-KLM stated that the arrangement with Apollo Global Management (NYSE:APO) was “purely financial” and would not result in the buyout firm acquiring an ownership share.

The involved Air France-KLM unit possesses a supply of spare engines.

According to a person close to the situation, revenue will be earned by “granting Air France access to this pool of spare engines.”

Sale-and-leaseback transactions are prevalent in the aviation industry, allowing airlines to lighten their balance sheets by selling newly delivered aircraft and engines to lessors then renting them back.

But the influx of investment from new sources of capital has intensified the competitiveness for conventional leasing companies.

At 08:32 GMT, Air France-KLM shares were up 3.4% to 4.39 euros, extending this year’s gains to 9.8%.

Air France-KLM stated in February that it intended to generate up to 4 billion euros in order to repay the assistance it got during the pandemic.

It announced this month that it was considering a capital raise and quasi-equity instruments to expedite payments to the French government, its largest shareholder.]

This week, CMA CGM announced that it would acquire a significant share in Air France-KLM.

($1 = 0.9449 euros)

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