The Air France and KLM group will pay $1.2bn in taxes and raise taxes on its fleet in an effort to improve its financial health and cut costs.
Key points:The French airline will also pay $400m in capital gains taxThe group will also spend $400 million on a fleet overhaulThe group said it would spend $4 billion on the fleet overhaulIn an effort aimed at keeping the business afloat, Air France Group (AFG) will start raising taxes on all its planes by 2026, as well as on new aircraft as part of an overhaul.
The tax-raising measures will be announced on Monday in Paris, a day after it was announced that the group would be paying $4.8bn in capital losses to avoid the end of the current fiscal year.
A statement said that the tax rises will come into force on April 1, 2020, while the tax hike on new planes will be introduced on July 1, 2021.
The statement also said that as a result of the tax-raise measures, AFG will spend $300m on the overhaul of its fleet, which will include the refurbishment of its old jets.
“We will be able to do that as well,” said Air France CEO Patrick Pouyanne.
“The restructuring will allow us to be able, in the long term, to have more planes.”
The group’s board approved the tax cuts in July last year and has been trying to reduce its debt load as a way of boosting its financial condition.AFG said the plan was “a strategic investment” in its “core business”, which is based in the French city of Paris.
The Paris-based airline, which has been operating under a French state ownership since 2008, is in a financial crisis after it failed to make financial progress in recent years.
The French government is keen to sell the airline, and it is also in talks with the US to buy the company.
The Air France group is a major European player and was a major contributor to the economic boom of the early 1990s.
However, it suffered significant financial losses in the years following the collapse of the global financial crisis.
The group is one of the world’s biggest airlines, but it has struggled to compete with rival jets, as it has reduced its fleet size, which is part of a move to cut costs amid a global economic slowdown.