Air France will get extra state assist to deal with mounting money owed.

Air France said Tuesday it would receive it A new € 4 billion ($ 4.7 billion) bailout from the French government is set to help the beleaguered airline cope with rising debts as a third wave of pandemic lockdowns across Europe prolong a slump in continental air traffic.

The support comes on top of the EUR 10.4 billion (USD 12.3 billion) loan and guarantees that Air France and its partner, the Netherlands-based KLM, will benefit from the French and Dutch over the past year Government received.

Air France-KLM chairman Benjamin Smith cited an “exceptionally challenging period” and said the funds would “give Air France-KLM more stability to move forward at the beginning of recovery as large-scale vaccination advances and borders around the world be reopened. “

Bruno Le Maire, France’s finance minister, said on Tuesday that the new aid will come in the form of a government-backed recapitalization, which includes € 3 billion in loans the airline’s government granted to the airline last year, in loans with no maturity as well 1 billion fresh capital will be converted into EUR through the issue of new shares.

The French government is the airline’s largest shareholder with 14.3 percent. The deal could allow the government to increase its stake to 30 percent, said Le Maire and Air France. by buying some of the new shares. China Eastern Airlines, also a major shareholder, will also attend, Air France said.

Air France-KLM lost two thirds of its customers last year, and its debt almost doubled to € 11 billion. An operating loss of 1.3 billion euros is expected for the first quarter.

With the acceleration of vaccinations in the US, air traffic has gradually recovered, leading to a return in ticket sales. Delta Air Lines announced it would be accepting more passengers and selling medium-sized seats for flights from May 1, more than a year after it was decided to leave them empty to ensure social distance.

In contrast, vaccine adoption in Europe has stalled and infections with new variants of the virus have gained traction, leading to renewed travel restrictions in France and neighboring countries. This is slowing the recovery of tourist traffic and leaving big flagship airlines like Air France-KLM, Lufthansa from Germany and Alitalia from Italy in trouble.

The French government recently lowered its forecast for economic growth for 2021 from 5 percent before the new lockdown to 5 percent.

Air France’s board of directors approved the deal Tuesday after the French government and European regulators struck a deal on terms to strengthen the airline’s balance sheet.

The Dutch government is in separate talks with European regulators about converting a EUR 1 billion loan to KLM into hybrid debt in return for slot concessions at Schiphol Airport in Amsterdam.

Air France employs tens of thousands of workers in France and is considered too big to fail. Nonetheless, Mr Le Maire said the aid is not a “blank check” for the company, which must “make an effort to be competitive” in exchange for the assistance and further reduce its carbon footprint.

In order to comply with European competition rules, Air France had to give 18 slots per day, equivalent to nine round-trip flights, to competing airlines in Orly, the second largest airport in Paris after Charles de Gaulle.

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