KLM too big to fail: Netherlands pledges €4 billion bailout

The Netherlands will provide between two and four billion euros in emergency funding to support Dutch flag carrier KLM. The airline would be in a very dangerous bind by the end of May without taxpayer support, a failure which would have a massive negative impact on life in the Netherlands, said Finance Minister Wopke Hoekstra and Infrastructure Minister Cora van Nieuwenhuizen at a press conference on Friday night.

"At the moment, the company can continue for a few weeks, but if 90 percent of the fleet is grounded, the end will soon come in sight. With this support, KLM will be able to continue for years to come. This is the best estimate we can give now, but we cannot determine what the future will look like," Hoekstra said.

"Without KLM, 40 percent of Schiphol's air traffic would be lost. We cannot afford to lose such an essential link in our infrastructure," Van Nieuwenhuizen said. Both she and Hoekstra said that many sectors benefit from KLM being in a healthy position, and that many businesses choose the Netherlands as a base because of Schiphol's connectivity.

On top of that, roughly 35 thousand jobs are at stake with KLM alone. Nearly 70 thousand people work at Schiphol. "This company, together with Schiphol, is vital for our country and our international economy," Hoekstra said.

Air France, which shares the same parent company as KLM, will also receive three billion euros in loans and guarantees from the French state, and another four billion euros in bank lending. The exact form of the Dutch package is also likely to be a combination of guarantees and loans, Hoekstra said.

Just as final details of the package have not been determined,  only some attached conditions to the bailout package are clear. "It is tax money from all of us, so we will also ask for something in return," Hoekstra said.

Dividends, for example, may not be distributed to shareholders, and bonuses or profit sharing deals must be suspended if KLM makes use of Dutch taxpayer funding. There will also be conditions linked to sustainability, working conditions, and how profits are allocated.

What is also known is that with over 90 percent of KLM's aircraft on the ground since a flurry of global travel restrictions forced the airline to slash its schedule the airline's expenses are continuing to mount. Without passengers to transport, and with few new tickets being booked, KLM's short-term revenue prospects are grim.

The Dutch government owns 14 percent of Air France - KLM, and the French government owns 14.3 percent. Delta Air Lines and China Eastern Airlines each own 8.8 percent, employees own 3.9 percent, and the airline group holds 0.3 percent. The remaining 50.1 percent is owned by other shareholders.