The European Commission has granted a €3.4bn Dutch aid measure to Netherlands network airline KLM.

The aid consists of a subordinated loan by the Dutch State and a state guarantee on loans from a consortium of banks.

It is approved under the State aid Temporary Framework adopted by EC on 19 March.

The ‘urgent liquidity’ will support the company, which has been affected by the Covid-19 pandemic.

European Commission executive vice-president Margrethe Vestager said: “KLM plays a key role for the Dutch economy in terms of employment and air connectivity. The crisis has hit the aviation sector particularly hard.

“This €3.4bn state guarantee and state loan will provide KLM with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak.

“The Netherlands imposed certain conditions on the aid measure with respect to profit allocation, working conditions and sustainability.

“Member states are free to design measures in line with their policy objectives and EU rules.”

Meanwhile, state aid allocated to European flag carrier airlines may allow fares to drop and pose a threat to low-cost airlines in Europe.

In April, Franco-Dutch airline holding company Air France-KLM and Air France secured €7bn in funding to maintain financial stability.

KLM is the second-largest private employer in Netherlands’ with more than 36,600 employees.