We Lower Our Fair Value Estimate as Air France-KLM Announces EUR 2.6 Billion Rights Issue

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. The group announced an additional EUR 2.56 billion rights issue in May 2022, while additional capital restructuring is required to fully restore the group's balance sheet. The high levels of indebtedness, low visibility, and high probability of further equity value destruction is reflected in our very high uncertainty rating.