We Lower Air France-KLM's FVE as We Incorporate Further Dilution From the Capital Restructuring

Air France-KLM is a European network carrier with major hubs at Charles de Gaulle Airport in Paris and Schiphol Airport in Amsterdam. The coronavirus dealt a heavy blow to the global airline industry, including Air France-KLM, whose balance sheet has been devastated. To shore up liquidity the group has received EUR 10.4 billion in state backed bailouts. The EUR 4 billion restructuring of the French state backed loans in April 2021 was not enough to plug the hole in the group’s balance sheet and comes with heavy restrictions, such as excluding the group from engaging in acquisitions. An additional capital raise of up to EUR 4 billion is required to restore the equity base and free the group from restrictions. The shape and timing of the capital restructuring is unknown, but it will undoubtedly be dilutive to existing shareholders. The low visibility and high probability of value destruction is reflected in our extreme uncertainty rating.