Two sources familiar with the company's plans told Reuters that Air France-KLM is considering delaying its planned capital increase because of the tough travel restrictions imposed by governments to mitigate the spread of the Omicron variant of the coronaviruses.
The French-Dutch carrier was hoping to raise 1 billion euros $1.13 billion by the end of the year to shore up its heavily-indebted, Pandemic-hit balance sheet and repay government aid, but this is now likely to be delayed, the two sources said, speaking on condition of anonymity.
One of the sources said that they need to sell a recovery story and that doesn't work with Omicron hovering.
The United States, Japan, Hong Kong, and a number of European countries have tightened borders and imposed new restrictions due to uncertainty surrounding the virulence of the new variant and its ability to evade vaccine protection.
Since the news of the variant emerged, British Airways-owner IAG has gone down almost 15% since Friday and Lufthansa and Air France-KLM have fallen around 9%.
In April, the airline completed a 4 billion euro recapitalisation package that included state support and a 1.036 billion euro rights issue that doubled the French government's stake to 30%.
It had more than 10 billion euros of cash at hand at the end of September and can afford to delay the plan. A source at the French government said that it needs to reimburse state aid to lift a EU ban on merger and acquisition M&A deals.
The chief executive of Air France-KLM, Ben Smith, said at the end of September that the company was aiming to raise new funds as soon as possible without giving an exact date. According to Refinitiv Eikon records, Air France's debt has gone up to 10.2 billion euros over the past week, and the company has seen it's borrowing costs go up over the past week because of government bailouts via perpetual instruments.
Market conditions are not ideal for a company at the moment, let alone an unrated travel firm, according to a third source, from the banking sector.
Air France-KLM does not have a rating from any of the main credit ratings agencies and is therefore not eligible for European Central Bank corporate debt purchases.