Air France, Airbus lining up for government-backed bailouts

Air France-KLM and Airbus SE are poised to tap French government-backed loans as the coronavirus outbreak drains corporate cash reserves, according to people familiar with the matter.

With the aviation industry among sectors most under pressure from the pandemic, the airline and planemaker, based in Paris and Toulouse respectively, will be among the first firms to receive French support, according to the people, who asked not to be named discussing private negotiations.

Airbus said it’s having regular dialogs with home-nation governments that are non-public in nature. Spokespeople for Air France-KLM and the French Finance Ministry declined to comment.

Air France-KLM traded 4.7% higher at 4.76 euros as of 3:48 p.m. in Paris, while Airbus was priced up 20% at 64.44 euros.

Like other carriers, Air France-KLM has seen demand all but wiped out as people stop traveling and nations close borders, with the company saying it may cancel 90% of flights. The situation has been exacerbated by political clashes over French and Dutch state holdings in the airline group, with France saying Wednesday it will consult the Netherlands before stepping in.

Airbus is grappling with an unprecedented reversal in fortunes as customers push back against deliveries and new orders dry up with build rates at record levels. The manufacturer hasn’t yet said whether it will dramatically slow production, but for both companies state credit lines will provide a safety net while as they hunker down to protect vital cash reserves.

Airbus said it participated in a meeting with the German Economy Ministry, alongside representatives of airlines and airports. Chancellor Angela Merkel has earmarked 550 billion euros ($590 billion) of lending to support business, with German airline Deutsche Lufthansa AG saying it held talks with a state bank.

French President Emmanuel Macron promised to guarantee up to 300 billion euros of bank loans Monday in an effort to bolster firms threatened by the impact of the virus, saying France was “at war” and that all government and parliamentary forces must be focused on fighting the epidemic.