Franco-Dutch airline Air France-KLM has outlined a plan that will help the group to further strengthen its cash position and restore its negative equity.

The cash-strengthening measures have been approved by the group’s board of directors.

As part of the measures, the company plans to introduce a capital increase with a priority subscription period for shareholders. It is expected to improve the group’s equity by up to €1bn.

The Dutch state and Delta Airlines, which respectively hold 14% and 8.8% of the share capital, will not subscribe to this capital increase.

The French state has committed to take part in the capital increase while China Eastern Airlines expressed interest to participate.

Additionally, the €3bn French State loan provided to Air France through the group will be converted into a perpetual hybrid bonds instrument. This will improve the group’s equity by €3bn.

The €4bn French state-backed loan has also been extended with a final maturity date in 2023 while the €2.4bn Dutch State-backed guaranteed loan has a maturity date in 2025.

Air France-KLM Group CEO Benjamin Smith said: “These first recapitalisation measures are an important milestone for our group in this exceptionally challenging period.

“They will provide Air France-KLM with greater stability to move forward when recovery starts, as large-scale vaccination progresses around the world and borders reopen.

“Ensuring Air France-KLM maintains a sustainable financial trajectory is paramount to realising our strategic plan, continuing the execution of our transformation plans at the group and at our airlines.”