Air France-KLM: Come fly with SLBs

While significant for an investment-grade issuer, this has a more muted impact on the funding spreads for Air France-KLM. Nevertheless, it also is a positive step to make a public climate commitment which will increase transparency in a challenging sector.

Examining the public information on this deal, we highlight the following positive elements of the SLB proposal.

Firstly, by issuing SLBs, Air France-KLM is shifting from post-pandemic government support to debt products that both increase transparency and their commitment to reducing emissions. The Key Performance Indicators (KPIs) included in the SLB are intensity measures and baselined to 2019, i.e., before the pandemic when volumes were high; setting the reduction from 2019 is therefore more ambitious, and the probability of pay-outs in the SLB structure commensurately higher. We estimate it at around 50%.

About the authors

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

Stephanie Mielnik

Stephanie was previously a Director of Research at AFII.