COVID-19 The European Commission approves the public guarantee scheme for Swedish airlines

The European Commission approved on 11 April 2020 Sweden’s aid scheme in the form of public guarantees to its airlines. The measure is based on Article 107. 3, b) of the Treaty on the Functioning of the EU, as implemented by the Commission’s Temporary Framework for state aid measures aimed at supporting the economy in the COVID-19 crisis. The scheme aims at providing airlines holding a Swedish license with liquidities to ensure their viability, as well as the continuity of their economic activities during and after the crisis. Indeed, air traffic was critically affected by the significant drop in air passenger travel following the travel restrictions, with the three largest Swedish airports observing a 93%-decrease by the end of March.

With a budget of approximately 455 million euros, the measure, in the form of State guarantees for new loans, will provide liquidities for airlines holding a Swedish commercial aviation license since 1st of January 2020. It should be noted that in accordance with the above-mentioned Temporary Framework, undertakings in difficulty on 31 December 2019 within the meaning of the General Block Exemption Regulation cannot benefit from this measure.

The European Commission recognized that the aid granted by Sweden was compliant with the conditions established in the Temporary Framework:

1. the guarantees apply to new loans linked to the liquidity needs of the airlines;
2. the guarantees can be granted by 31 December 2020 at the latest;
3. the guarantee cannot exceed 90% of the underlying loan;
4. the maximum duration of the guarantees is six years and
5. the guarantee schemes do not exceed the threshold set in the Temporary Framework.

Finally, the Commission declared the aid scheme to be necessary, appropriate and proportionate to the situation created by the COVID-19 outbreak.

Since the beginning of the present crisis, the Swedish public guarantee scheme is one of the few state aid measures adopted by Member States (and authorized by the European Commission) in the aviation sector – albeit one of the most critically affected sectors by the crisis. Earlier measures include the French scheme deferring the payment by airlines of certain aeronautical taxes (for more information, see our aviation update of 2 April 2020), the scheme set up by the Walloon region deferring the payment of concession fees in favour of the airports of Liege and Charleroi and the Danish state aid granting a public guarantee up to 137 million euros to compensate Scandinavian Airlines.

Further measures in favour of this sector will certainly be the subject of new Commission decisions in the coming weeks as all stakeholders in the aviation industry are affected by the crisis, in particular airports of all sizes, ground handling companies and the tourism sector as a whole.