Air France drops bid for Aigle Azur as liquidation looms

Air France-KLM pulled back from a rescue bid for Aigle Azur on Thursday, missing an overnight court deadline to improve its earlier offer for part of the collapsed budget carrier's operations and staff. An Air France spokeswoman confirmed it had decided against submitting an expected joint bid with long-haul niche carrier Air Caraibes "because our conditions for doing so weren't met."

Aigle Azur, whose biggest shareholders are China's HNA Group and Brazilian entrepreneur David Neeleman, has suffered in the wake of a botched long-haul expansion. Air France's withdrawal deals a blow to government-backed efforts to find a buyer for part or all of Aigle Azur as a going concern and save a large proportion of its 1,150 jobs.

Aigle Azur's looming bankruptcy is the latest among smaller European airlines struggling with higher fuel costs and stiff competition from low-cost rivals. The privately-held carrier, founded in 1946 to serve Algeria and other north African routes, was granted protection from creditors early this month and grounded its fleet of 11 Airbus jets within days, stranding some 19,000 passengers.

Other potential bidders include British low-cost operator Easyjet, which had submitted an earlier "expression of interest" in Aigle Azur's operations from Paris Orly, including valuable take-off and landing slots.

FAST-CHANGING

Lionel Guerin, a former Air France executive, has also resubmitted a new bid contingent upon 15 million euros in new government financing, according to French news site La Tribune, which first reported Air France's withdrawal. Absorbing Aigle Azur operations would have required Air France unions to waive internal rules barring the carrier from granting any seniority or flight captain roles to new hires.

Air France shares were little changed at 9.11 euros at 1021 GMT. Transport Minister Jean-Baptiste Djebbari remains in contact with potential buyers and their unions in a "fast-changing situation", a French official said, adding that bidders can legally cancel any withdrawal within 48 hours.

Reuters was unable to contact Guerin, while a spokeswoman for Air Caraibes parent Dubreuil Group did not immediately respond to requests for comment. The Evry commercial court south of Paris began Aigle Azur's liquidation on Monday under a "going concern" process that buys more time for potential rescue bids.

The court resumes hearings on Sept. 23, with the carrier's liquidation scheduled to begin four days later, in the absence of any agreed takeover plan.

Also Read: Easyjet confirms interest in Aigle Azur's Orly operations

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