COVID-19: European Commission authorises fourth Italian aid to Alitalia
Since the beginning of the COVID-19 crisis, Alitalia has received three grants of EUR 296 million in compensation from the Italian State for the damage suffered respectively from 1 March to 15 June 2020, from 16 June to 31 October 2020 and from 1 November to 31 December 2020 as a result of government travel restrictions imposed by Italy and other destination countries to limit the spread of COVID-19. These aids were approved by the Commission in decisions of 4 September 2020, 29 December 2020 and 26 March 2021 (see our articles of 26 January 2021 and 22 April 2021).
On 12 May 2021, the Commission authorised a fourth Italian aid of EUR 12.835 million for the damage suffered on certain routes during January 2021 due to the pandemic. This new subsidy brings the total State aid approved by the EU for Alitalia for the damage caused by the pandemic from March 2020 to January 2021 to almost EUR 310 million.
As with the above-mentioned aid, the Commission has analysed the compatibility of the aid in the light of Article 107.2(b) TFEU. This provision allows the Commission to authorise State aid granted by Member States to compensate certain undertakings or sectors for damage caused directly by exceptional occurrences. Since March 2020, the Commission has considered that the COVID-19 pandemic constitutes an exceptional occurrence due to its exceptional and unforeseeable nature and its major impact on the economy. This legal basis allows aid to be granted to companies in difficulty, such as Alitalia, which are excluded from the benefit of aid based on the Temporary Framework on State aid measures to support the economy in the current context of the outbreak of COVID-19.
In the present case, the Commission considered that the Italian measure would compensate for the damage suffered by Alitalia, which is directly linked to the COVID-19 outbreak, since the loss of profitability on routes due to the travel restrictions during the period in question can be considered as damage directly linked to the exceptional event. It also considered that the measure was proportionate, as the route-by-route analysis presented by Italy adequately identifies the damage attributable to the containment measures and therefore the compensation does not go beyond what is necessary to remedy the damage on these routes. The Commission has a restrictive interpretation of the notion of damage that must result from travel restriction measures imposed by States. Thus, simple recommendations not to travel would not allow compensation to be obtained on the basis of this European provision.
Consequently, the Commission concluded that the new Italian compensation measure is in line with EU state aid rules.
It should be recalled that Alitalia, which has been under provisional administration since its declaration of bankruptcy in April 2017, benefited in May 2017 from a bridging loan of EUR 900 million from the Italian State. At the end of 2019, the airline obtained an additional public loan of EUR 400 million (see our article of 9 March 2020). The Commission opened two in-depth investigations in 2018 and 2020 respectively into the two public loans.
Furthermore, it is worth highlighting that since the beginning of the crisis, many airlines have benefited from support measures from their respective States on the basis of Article 107.2(b) TFEU. In March and April 2020, the Commission approved the French aid scheme aimed at deferring the payment of certain aviation taxes as well as the Danish and Swedish aid to SAS. In May 2020, it gave its green light to the public loan guaranteed by the German State in favour of Condor. Then, in August 2020, the Commission also approved, on the basis of Article 107.2(b) of the TFEU, the Romanian public guarantee for the airline Blue Air. Finally, in October 2020, the Commission approved the Romanian aid in favour of Tarom.
The COVID-19 pandemic has severely affected the aviation sector as a whole. Despite the use of an exceptional legal framework allowing the Commission to authorise generous aid to the air transport industry, the pace of recovery remains uncertain for the coming years. Indeed, according to IATA forecasts, the capacity of the European aviation sector is likely to be significantly reduced in the medium term, at least until 2023 or even 2024.
