Paris and EU agree deal to save Air France from financial disaster

The French government has reached a deal with the European Commission allowing Paris to inject fresh money into the national carrier, Air France, whose finances are crumbling under the impact of coronavirus restrictions.

The announcement of the agreement in principle was made on Sunday by Bruno Le Maire, the French Economy Minister.

Paris has been involved in several weeks of intense discussions with the European Commission, with a view to securing the future of the national airline company.

The Commission attempts to ensure that state aid does not give companies an unfair advantage.

The French state holds a 14 percent stake in Air France. The company has suffered, like airlines the world over, from a huge reduction in passenger traffic in the wake of the Covid pandemic.

Air France losses in 2020 are estimated at seven billion euros.

State aid will cost Air France landing rights

Bruno Le Maire has not indicated how much help Air France will be allowed under the European agreement, saying that details will be worked out with the company. 

Senior management at the airline are to meet on Monday to confirm their acceptance - in principle - of the European deal.

In exchange for increased financial assistance, Air France has agreed to relinquish "a certain number" of its landing slots at Paris Orly airport.  

According to EU rules, any government granting more than 250 million euros in aid to a company with "significant market power" had to propose additional measures to safeguard competition.

Rival airline Ryanair, Europe's largest carrier in terms of passenger numbers, has criticised previous French state aid for Air France, saying it distorts competition.

'Very good news for the French aviation sector'

Minister Le Maire described the agreement with the Commission as "very good news for Air France, and for the whole French aviation sector," adding that negotiations had been "tough".

The minister declined to say how many slots at Orly Air France would have to give up, but said it would be fewer than the 24 the Commission had initially asked for.

The French government has already given "a lot of help" to Air France to enable the company to weather the Covid crisis, with an initial sum of €7 billion. The state will "not sign a blank cheque" this time around, Le Maire said.

"There are tens of thousands of jobs involved. Air France is strategic for our country," the minister said.

But the carrier must become more competitive and continue to reduce carbon dioxide emissions, he insisted.

"The taxpayer is making an effort, and Air France must also make an effort," Le Maire added.