Dutch government backs 3.4 bln euro KLM support deal -minister

The government will appoint a "state agent" to KLM's board in order to ensure that the financial support funded by taxpayers is spent exclusively on Dutch operations. The French and Dutch governments remain at loggerheads over management and strategy at Air France-KLM, created by the 2004 merger between the two national carriers.

The Dutch government on Friday said it would provide Air France-KLM's Dutch subsidiary KLM with a 3.4 billion euro ($3.81 billion) financing package to help it survive during the coronavirus pandemic.

Finance Minister Wopke Hoekstra said the package would consist of 2.4 billion euros in bank loans with guarantees and a 1 billion euro direct loan. France announced a 7 billion euro bailout package for Air France SA in April.

"This package is needed to make sure that KLM and Air France can continue to fulfill the important role that they have in our economy," Hoekstra told a news conference in The Hague. "In the past weeks we have tried to divide the pain as fairly as possible," he said.

Pilots will have to take a pay cut of up to 20%, and the company as a whole will have to cut costs by 15%. There was no word on layoffs, which are expected, but Hoekstra said some cuts are inevitable to KLM's staff of some 30,000. The state support must still be approved by the European Union.

The Dutch parliament sought several conditions in return for the use of taxpayer money, including fewer night flights and a 50% reduction in carbon dioxide emissions by 2030. The government will appoint a "state agent" to KLM's board in order to ensure that the financial support funded by taxpayers is spent exclusively on Dutch operations.

The French and Dutch governments remain at loggerheads over management and strategy at Air France-KLM, created by the 2004 merger between the two national carriers. In March last year, the Dutch state took a surprise 14% stake in the group to match France's 14% holding and counter its clout.

($1 = 0.8913 euros)