Air France-KLM in more funding talks with Apollo, for €1.5bn

Air France-KLM has entered further funding talks with private equity firm Apollo Global Management, this time for the “potential financing” of a new subsidiary that “will hold the trademark and most of the commercial partner contracts related to Air France and KLM Royal Dutch Airlines’ joint loyalty programme (Flying Blue),” it said in a statement.

The quasi-equity financing to the “dedicated operating affiliate of Air France-KLM” would amount to EUR1.5 billion euros (USD1.65 billion), the group explained on July 27, in a deal allowing it “to make a further step towards its commitment to restore its equity and strengthen its balance sheet, aside from net profit generation and/or straight hybrid bonds.”

The new entity “will become the exclusive issuer of miles for the airlines and partners,” but an agreement would incur no changes to the operation of the loyalty scheme for members. Air France-KLM would keep managing and operating Flying Blue and retain full ownership rights of the customer database, the group stressed.

Earlier in July, Air France-KLM signed “a definitive agreement” with Apollo Global Management for a EUR500 million (USD551 million) capital injection that will go to one of its engineering and maintenance units. Last year, the two entered into a similar recapitalisation measure when the private equity firm invested the same-sized sum in the company to help repay French state aid.

The new financing “would be non-dilutive, structured through a quasi-equity instrument, similarly to that raised by Air France on a pool of spare engines in July 2022 and maintenance activity components in July 2023,” the airline clarified. “Under this agreement, Apollo-managed funds would subscribe to perpetual bonds issued by this dedicated operating affiliate of Air France-KLM.”

Apollo confirmed the talks with its own statement, saying that “the contemplated transaction highlights our ability to work with companies as long-term partners to provide creative, scaled capital solutions that are responsive to their unique needs.”