Business Updates: Air France to Get a $4.7 Billion Bailoutavril 6, 2021
Air France on Tuesday said it would receive a new bailout from the French government worth 4 billion euros ($4.7 billion) to help the beleaguered airline cope with mounting debts as a third wave of pandemic lockdowns around Europe prolong a slump in continental air travel.
The support comes on top of €10.4 billion ($12.3 billion) in loans and guarantees that Air France and its partner, the Netherlands-based KLM, received from the French and Dutch governments last year.
Air France-KLM chief executive, Benjamin Smith, citing an “exceptionally challenging period,” said the funds would “provide Air France-KLM with greater stability to move forward when recovery starts, as large-scale vaccination progresses around the world and borders reopen.”
Bruno Le Maire, France’s finance minister, said Tuesday that the new aid is taking the form of a state-backed recapitalization, which involves converting €3 billion in loans the government granted the airline last year into bonds with no maturity, as well as €1 billion in fresh capital through the issuance of new shares.
The French government is the airline’s largest shareholder, at 14.3 percent. The agreement could allow the government to raise its stake as high as 30 percent, Mr. Le Maire and Air France said, by buying some of the new shares. China Eastern Airlines, also a large shareholder, will also participate, Air France said.
Air France-KLM lost two-thirds of its customers last year, and its debt has nearly doubled to €11 billion. It expects an operating loss of €1.3 billion in the first quarter.
As vaccinations speed ahead in the United States, air travel has started to recover, fueling a return of ticket sales. Delta Air Lines announced it would add more passengers and start selling middle seats for flights starting May 1.
By contrast, Europe’s vaccine rollout has faltered and variants of the virus have gained ground, prompting renewed travel restrictions. That has left major flagship air carriers, including Air France-KLM, Lufthansa of Germany, and Alitalia of Italy, struggling.
The French government recently cut its economic growth forecast for 2021 to 5 percent, down from 6 percent.
Air France’s board approved the deal on Tuesday after the French government and European regulators agreed on the terms.
The Dutch government is holding separate talks with European regulators over converting a €1 billion loan to KLM into hybrid debt in return for slot concessions at the Schiphol Airport in Amsterdam.
Air France employs tens of thousands of workers in France and is considered too big to fail. Still, Mr. Le Maire said the aid was not a “blank check,” adding that the company would have to “make efforts on competitiveness” in exchange for the support and must continue to reduce its carbon emissions.
To conform to European competition rules, Air France was forced to relinquish 18 slots per day, representing nine round-trips, to competing airlines at Orly, Paris’ second-largest airport after Charles de Gaulle.
Credit Suisse said Tuesday it would replace the head of its investment bank and the chief of risk and compliance after losses from its involvement with Archegos Capital Management, the collapsed hedge fund, totaled nearly $5 billion.
The Zurich-based bank is in turmoil after a series of disasters that have battered its reputation and are likely to diminish its global clout. Credit Suisse also serves as a warning of the risks that may lurk in the financial system, as bankers and investors try to earn returns when interest rates are at rock bottom and stock values are already frothy.
Credit Suisse detailed the financial impact of its dealings with Archegos for the first time on Tuesday, saying it would report a loss for the first quarter of 900 million Swiss francs after booking a charge of 4.4 billion francs, or $4.7 billion, related to the hedge fund. The losses were higher than some estimates.
Brian Chin, the chief executive of Credit Suisse’s investment bank, will leave on April 30. Lara Warner, the chief risk and compliance officer, will step down immediately, the bank said.
Members of Credit Suisse’s executive board will forgo their bonuses for 2020 and 2021, the bank said. Credit Suisse will also cancel plans to buy back its own shares, a way of pushing up the stock price. But the bank, seeking to dispel any questions about its overall health, said its capital is still at levels considered acceptable.
Credit Suisse shares were down more than 2 percent in Zurich trading early Tuesday. They have lost one-quarter of their value since the beginning of March.
Thomas Gottstein, the chief executive of Credit Suisse since last year, said the bank would hire outside experts to investigate what led to the “unacceptable” loss from Archegos as well as the bank’s involvement with Greensill Capital, which collapsed last month.
Credit Suisse’s asset management unit oversaw $10 billion in funds that Greensill packaged based on financing it provided to companies, many of which had low credit ratings.
“Serious lessons will be learned,” Mr. Gottstein said.
Starbucks says it plans to eliminate all single-use cups from its South Korean stores by 2025, the chain’s first move of this sort as it seeks to reduce its carbon footprint.
In a statement on Monday, Starbucks said that it planned to introduce a “cup circularity program” in some stores beginning this summer, in which customers would pay a deposit for reusable cups that would be refunded when the containers are returned and scanned at contactless kiosks. The arrangement would be gradually expanded to cafes across the country over the next four years.
“Starbucks Coffee Korea is a leader in sustainability for the company globally, and we are excited to leverage the learnings from this initiative to drive meaningful change in our stores and inform future innovation on a regional and global scale,” Sara Trilling, the president of Starbucks Asia Pacific, said in the statement.
South Korea has in recent years tried to cut back on disposable waste in cafes, banning the use of plastic cups for dine-in customers in 2018. Legislation introduced last year would require fast food and coffee chains to charge refundable deposits for disposable cups to encourage returns and recycling. Last year, the environmental ministry said it planned to reduce the country’s plastic waste by one-fifth by 2025.
The increased use of plastic packaging and containers amid the coronavirus pandemic has been a setback for initiatives aimed at reducing single-use plastic waste. In March 2020, Starbucks and other chains said they would no longer offer drinks in washable mugs or customer-owned cups to prevent the spread of the virus.