The European Commission has approved, under EU State aid rules, a €3.4 billion Dutch aid measure consisting of a State guarantee on loans and a subordinated State loan to provide urgent liquidity to KLM. The measures were approved under the State aid Temporary Framework adopted by the Commission on the 19th of March 2020.
“KLM plays a key role for the Dutch economy in terms of employment and air connectivity,” Executive Vice-President Margrethe Vestager, in charge of competition policy, said. “This €3.4 billion State guarantee and State loan will offer the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak. Member States are free to design measures in line with their policy objectives and EU rules.”
The Dutch aid measure
KLM is part of the Air France-KLM group, in which the Dutch state holds a participation. KLM is the Netherlands’ second-largest private employer with over 36,600 employees.
Due to travel restrictions, KLM has experienced high operating losses. As of July, KLM does not have sufficient liquidity to finance the ramp-up of its activities. The support from the Dutch government was seen as essential to obtain vital liquidity to face this difficult period. The Dutch government has shown that all other potential means to obtain liquidity on the markets had been exhausted.
The Netherlands notified the Commission, under EU State aid rules, of an aid measure to KLM to enable the company to mitigate the negative consequences of the COVID-19 outbreak. The measure, which has a total budget of €3.4 billion, will take the form of: (i) a State guarantee on loans provided by a consortium of banks, and (ii) a subordinated loan to the company by the Dutch State.
The Commission found that the State guarantee is in line with the conditions set out in the Temporary Framework: (i) the guarantee premium is in line with the conditions under the Temporary Framework, increasing over time to encourage early reimbursement, (ii) the guarantee will be granted before 31st December this year, (iii) the loan backed by the guarantee cannot exceed €2.4 billion and is below the limits of the Temporary Framework, (iv) the maximum duration of the guarantee is 6 years and will not cover more than 90% of the loan backed by such a guarantee, and (v) KLM was not in difficulty on or before 31st December 2019. Safeguards are in place to ensure that the advantage is entirely passed to the beneficiary.
With respect to the subordinated State loan, the Commission found that this measure is also in line with the Temporary Framework: (i) the remuneration is in line with the conditions under the Temporary Framework, increasing over time to encourage early reimbursement, (ii) the loan will be granted before 31st December this year, (iii) the amount of the loan is below the limits of the Temporary Framework, (iv) the maximum duration of the loan is 5.5 years, and (v) KLM was not in difficulty on or before 31st December 2019.
The Commission concluded that the Dutch measure will contribute to managing the economic impact of COVID-19 in the Netherlands. It is necessary, appropriate, and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out Temporary Framework.
