By Abhinav Ramnarayan and Gwénaëlle Barzic

LONDON, (Reuters) – Air France-KLM may delay its capital growth due to travel restrictions imposed in part by the governments to limit the spread of Omicron coronavirus. Two sources close to the plans of Air France-KLM told Reuters that the airline is reviewing these restrictions.

According to two anonymous sources, the French-Dutch airline was hoping to raise $1 billion ($1.13 billion) to repay its government aid and shore up its pandemic-hit, heavily-indebted balance sheet by year’s end. However, this may now be delayed.

It doesn’t make sense mathematically. One source said that they need to tell a story about recovery, and Omicron hovering isn’t the best way.

Air France-KLM refused to comment.

U.S., Japan, Hong Kong, and other European nations have all tightened their borders amid uncertainties about the virus’s viability and ability to escape vaccine protection.

Since Friday’s news about the variant, shares in global travel companies have plunged. IAG (LON) owned by British Airways has fallen almost 15% and Lufthansa-owned Air France-KLM is down approximately 9%.

Already in April, the airline completed a recapitalisation package of 4 billion euros. It also included state support as well as a rights issue for 1.036 billion euros that increased France’s participation to 30%.

At the September end, it had cash reserves of more than 10 million euros and is able to postpone the plan. Yet, it needs to reimburse state aid to lift a EU ban on merger and acquisition (M&A) deals, a source at the French government said.

SOARING DEBT

Ben Smith, Air France-KLM’s chief executive, stated at the end September that the company wanted to raise additional funds as soon as possible. He did not give a date. Refinitiv Eikon data shows that Air France’s debt has increased to 10.2 million euros due to perpetual instruments. In addition, the company has experienced an increase in borrowing costs over the past week.

A third source from the banking industry stated that “I wouldn’t be advising them” to go to the market soon. Market conditions were not optimal for any business at the moment.

Air France-KLM has not been rated by any major credit rating agencies. Therefore, it is not eligible to purchase corporate debt from the European Central Bank.