In Case Of Emergency

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What's going on?

European regulators agreed on Tuesday to let the French government give Air France-KLM almost $5 billion in aid – just what it needs to stay calm in a crisis.

What does this mean?

Air France-KLM almost seems bound to run out of money eventually: the airline’s been burning through almost $12 million every day, and international travel isn’t exactly taking off. But thanks to a second rescue package courtesy of the French government, it’s kept the wolf from the door for a while longer.

The bailout does come with some caveats, mind you – namely that Air France-KLM can’t go spending the cash on bonuses, dividends, or share buybacks until the money’s repaid. The French government has its own rules to stick to, agreeing with European legislators that it would cut its stake in the airline – as much as 30% – back to pre-pandemic levels by 2027.

Why should I care?

Zooming in: Low-cost airlines have better odds. 

There’s another trade-off Air France-KLM will need to make: the airline has to sell 4% of its Paris-Orly airport time slots to airlines whose aircraft are based there, which doesn’t include many low-cost carriers. They might not be happy about that, but it’s not like they have much competition from the big carriers right now: not only do budget airlines have lower operating costs, they also specialize in leisure travel – a market that’s recovering faster than business flights.

Zooming out: US travel is on the up again. 

Rising coronavirus infections might be ruining European travel, but new analysis found that US travel demand had risen to half 2019’s levels by mid-March – the highest since the pandemic began. It even estimated that US domestic air travel will have fully recovered by early next year, with business and international travel to follow in 2023. That’s a lot quicker than expected, and suggests stimulus checks and vaccine rollouts might already be paying off.

Originally posted as part of the Finimize daily email.

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