Air France-KLM, Air France, and KLM Royal Dutch Airlines have announced they have signed two revolving credit facilities (RCFs) linked to sustainable development for a total amount of EUR2.2 billion euros (USD2.4 billion).
For each facility, a set of Environmental, Social and Governance (ESG) key performance indicators (KPIs) are embedded in the financing cost, the parties said in a joint statement. Achievement of dedicated sustainability indicators will result in lower interest margins. "The two RCFs include a financing cost margin adjustment mechanism (upward or downward) conditional to the independent achievement of these dedicated indicators (reduction of the unit CO2 emission, an increase of the share of sustainable aviation fuel, among others)," the airlines explained.
This is the second sustainability-linked transaction undertaken by Air France-KLM combined with Air France and KLM after its inaugural sustainability-linked bond issued in January 2023.
Air France-KLM & Air France
As combined borrowers, Air France-KLM and Air France have signed a EUR1.2 billion (USD1.24 billion) sustainability-linked RCF. This new facility has an initial 2026 maturity, includes two one-year extension options and provides for a EUR100 million (USD109 million) accordion increase option at the lenders' discretion during one year following the signing date. This RCF was coordinated by Crédit Agricole Corporate and Investment Bank (CACIB) and Natixis, jointly acting as global coordinators, ESG coordinators and documentation agents, and concluded with a syndicate of 15 international banks.
On March 15, Air France-KLM announced it had fully repaid the remaining EUR2.5 billion (USD2.7 billion) from its initial EUR4 billion (USD4.4 billion) bank loan guaranteed by the French State, granted during the Covid-19 crisis. It said its solid cash position combined with the EUR1 billion proceeds of the sustainability-linked bond issued in January 2023 had enabled it to accelerate and close the repayment in full.
KLM
KLM signed a EUR1 billion (USD1.09 billion) RCF including ESG KPI's with an initial 2027 maturity which includes two one-year extension options and provides for a EUR200 million (USD218 million) accordion increase option at the lenders' discretion. The RCF was coordinated by ABN AMRO, ING and Rabobank, with Crédit Agricole Corporate and Investment Bank (CACIB) acting as coordinator for the ESG targets. It was concluded with a syndicate of 14 international banks.
KLM, in a separate statement, said it was now no longer dependent on the Dutch state as the new facility replaces a state financial support package consisting of a direct loan of EUR1 billion and a bank credit facility of EUR2.4 billion (USD2.6 billion), 90% guaranteed by the Dutch state from the same date. It said the state support package's termination means that the Dutch state's conditions no longer apply to the aid.
Extended during the Covid-19 crisis, KLM withdrew EUR942 million (USD1 billion) of the available EUR3.4 billion (USD3.7 billion) in 2020. This amount was fully repaid in June 2022, thanks to a rapid recovery in flying demand.
"It is positive news that we can stand on our own two feet after such a difficult period. We are grateful to the Dutch state for its support during the corona crisis. Our focus remains on achieving our sustainability goals and remaining financially sound with structural cost savings," commented KLM Chief Executive Officer Marjan Rintel.
"It is fantastic that we can end state aid three years after the outbreak of the corona pandemic. We can take this step thanks to KLM's strong cash position and the good prospects for aviation. I am pleased with the confidence the participating banks have in KLM's future. With this, we leave the corona crisis behind us. The enormous support from both government and banks has been essential for KLM during this period," added Chief Financial Officer Erik Swelheim.
