Air France-KLM Said to Consider Capital Increase in 2014

Photographer: Balint Porneczi/Bloomberg

An Air France aircraft takes off from Toulouse-Blagnac airport in Toulouse. Air France-KLM Group is making progress with its turnaround, though still has work to do as the Air France unit battles higher costs than Dutch KLM because of government taxes and charges. Close

An Air France aircraft takes off from Toulouse-Blagnac airport in Toulouse. Air... Read More

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Photographer: Balint Porneczi/Bloomberg

An Air France aircraft takes off from Toulouse-Blagnac airport in Toulouse. Air France-KLM Group is making progress with its turnaround, though still has work to do as the Air France unit battles higher costs than Dutch KLM because of government taxes and charges.

Air France-KLM Group (AF), Europe’s largest airline, is looking to raise capital before year-end to boost its share equity, people familiar with the plan said.

The airline would probably choose a public share offering, said one of the people, who asked not to be identified as the discussions are private. The increase may have a value of about 1 billion euros ($1.36 billion), French newspaper La Tribune reported today, citing people it didn’t identify.

The airline group is looking to pare debt and slash spending through job cuts as it pushes for a return to profit. The company is making progress with its turnaround, though still has work to do as the Air France unit battles higher costs than Dutch KLM because of government taxes and charges.

An Air France spokesman said the company had no comment on its capital requirement or the report in La Tribune. Air France declined as much as 47 cents, or 5.4 percent, to 8.22 euros in Paris, erasing a gain of as much as 3.5 percent in earlier trading. The stock has advanced 12 percent this year.

The timing of the sale hasn’t been decided and may only come later in the year, the people said. One condition would be a higher stock price, assuming the positive momentum continues, one person said. The company went public in 1999 at about 14 euros a share.

Stock Performance

The stock gained 8.4 percent last year, trailing smaller competitor International Consolidated Airlines Group SA (IAG), whose stock price more than doubled last year.

SAS Group, the Nordic region’s largest airline, today announced plans to sell shares and convertible bonds valued at 4 billion Swedish kronor ($615 million) to help finance the renewal of its fleet and cut dependence on banks. SAS will sell about 4 million preferred shares worth 2 billion kronor, plus as much as 2 billion kronor of bonds convertible into shares.

A share sale by Air France would raise capital to balance out the company’s high debt. Air France said in October that net debt at the end of the third quarter stood at 5.4 billion euros. The financial ratio of net debt to earnings before interest, tax, depreciation and amortization was at 3.1 on 12 trailing months at the end of September.

Air France KLM, which has 3.7 billion euros in cash, in November declined to participate in a planned capital increase at Italian carrier Alitalia SpA, in which it owned a 25 percent stake, saying the necessary financial restructuring measures hadn’t been met.

To contact the reporters on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net; Ruth David in London at rdavid9@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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