French Finance Minister, Bruno Le Maire, said the decision would see the French state raise its stake in Air France to 30 percent, up from 14.9 percent.
He also described it as a sign of commitment to both the airline and its staff.
The agreement comes after lengthy talks between Paris and the EU Commission, which is tasked with ensuring state aid does not give companies an unfair advantage.
Paris and EU agree deal to save Air France from financial disaster https://t.co/asPCOxS3dV via @RFI_En pic.twitter.com/vq4HlNmtr3
— RFI English (@RFI_En) April 5, 2021
"This gives competing carriers the chance to expand their activities at this airport, ensuring fair prices and increased choice for European consumers," EU competition commissioner Margrethe Vestager said.
As part of the deal, Air France is to give up about 18 of its valuable landing slots per day at Paris’s second-largest airport, Orly.
'Boost for French aviation'
Le Maire earlier described the decision as very good news for Air France, and for the whole French aviation sector. He said that negotiations had been tough.
Rival airline Ryanair, Europe's largest carrier in terms of passenger numbers, has criticised previous French state assistance for Air France, saying it distorts competition.
Dutch carrier KLM, a partner of Air France, will not benefit from the aid.
