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Coronavirus: Air France gets green light for €7bn bailout

An Air France plane crosses a bridge as he prepares to take off at Paris Charles de Gaulle airport, in Roissy, near Paris, Wednesday, April 11, 2018. About 30 percent of Air France flights scheduled on Wednesday are expected to be canceled as flight crews and ground staff started a seventh day of strike. (AP Photo/Christophe Ena)
The bailout has been approved under newly relaxed state aid rules. (Christophe Ena/AP Photo)

The European Commission has approved plans for the French government to give Air France a €7bn ($7.7bn, £6.2bn) lifeline to help it survive the COVID-19 pandemic.

The EU’s competition watchdog said on Monday it had green lit the plan under newly relaxed state aid rules.

The approval means the French government can press ahead with state guarantees on loans and a shareholder loan to Air France. The aid package will total €7bn.

“This €7bn French guarantee and shareholder loan will provide Air France with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak,” EU competition commissioner Margrethe Vestager said in a statement.

READ MORE: Travel startups ask Google to share the COVID-19 burden

Shares in Air France (AF.PA) were down 6%, making it the worst performer on the CAC 40 (^FCHI) amid a broader sell-off.

Such sweeping support for France’s national carrier would be illegal in normal times but the EU relaxed rules around state aid in late March to allow member states to support their economies through the coronavirus pandemic.

Vestager’s department had already approved a €300bn French support package but the Air France aid required additional approval because it went further. Under the scheme, the French government will guarantee 90% of loans made to Air France, higher than the 70% guarantee rate approved in the initial aid package.

“The aviation industry is important in terms of jobs and connectivity,” Vestager said in a statment. “In the context of the coronavirus outbreak, Air France has also been playing an essential role in the repatriation of citizens and for the transport of medical equipment.

“We have cooperated closely with France, as with many other Member States, to ensure that public support to tackle the current crisis can be put in place as quickly and effectively as possible, in line with EU rules.”

READ MORE: European factories suffer bleakest month in decades

Air France is set to report first quarter earnings on Thursday, giving an insight into just how badly it has been battered by the coronavirus crisis.