Air France-KLM’s Flying Blue Paves the Way for €1.5bn Funding
The airline group is in talks with Apollo Global Management over a $1.64 billion financial package backed by its frequent flyer program
Last week, Air-France-KLM disclosed that it is in talks with Apollo Global Management, a private equity firm, regarding a €1.5bn ($1.64bn) financing package supported by its frequent flyer program, Flying Blue.
Under the terms of the potential agreement, Apollo Global Management will hold the trademark and the majority of commercial partner contracts concerning Air France and KLM’s joint loyalty program.
The private equity company will subsequently become the exclusive issuer of miles for both airlines. However, any agreement wouldn’t affect how the loyalty scheme works for members, and all of Air France’s and KLM’s employee contracts will be respected.
Air France-KLM Group stressed that the airlines will retain responsibility for the management and operation of Flying Blue while keeping full ownership rights of the program’s customer database.
According to a statement released by Air France-KLM Group on July 27, the financing package would be structured through a quasi-equity instrument. Under the agreement, “Apollo-managed funds would subscribe to perpetual bonds issued by this dedicated operating affiliate of Air France-KLM.”
The airline group is making this move to secure external funding in an attempt to restore its balance sheet after a difficult few years, with Air France-KLM Chief Operating Officer Steven Zaat claiming the group is in a “negative equity situation.”
Air France-KLM has previously secured €500m ($551m) of funding from Apollo towards one of its engineering and maintenance units after reaching a “definitive agreement” in July. It also secured the same amount of funding from Apollo in July 2022 to redeem perpetual bonds issued by the French state during the pandemic.
“Apollo is very pleased to enter into exclusive discussions with Air France-KLM, deepening our partnership with one of the world’s leading airlines,” said Apollo Partner Jamshid Ehsani. “The contemplated transaction highlights our ability to work with companies as long-term partners to provide creative, scaled capital solutions that are responsive to their unique needs.”
Air France-KLM’s Flying Blue loyalty program allows members to earn miles in numerous ways, from booking flights and hotels to rental cars and shopping at partner stores, and redeem them on an equally wide range of products. The loyalty program also covers the airline group’s subsidiary carriers, including Transavia, Aircalin, and TAROM.
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