State aid: Italian EUR 400 million loan for Alitalia qualified by the European Commission as illegal aid

On 27 March 2023, the European Commission concluded that an Italian loan of EUR 400 million granted in 2019 in favour of Alitalia constituted illegal and incompatible aid that has to be reimbursed.

Alitalia has benefitted from numerous public support measures over the years. The airline found itself in a financial pickle and was declared bankrupt in May 2017. To ensure the continuity of its operations, the Italian State provided the airline with two loans, one of EUR 900 million granted in 2017 and the second of EUR 400 million in 2019.

In 2018, the European Commission opened an investigation and in 2020 a formal procedure on the first 2017 loan, which led to its decision in 2021. It concluded that this public support was illegal and incompatible aid.

The second loan of EUR 400 million was the object of a separate enquiry as its legal basis and timing were different from that of the public support in 2017.

Nevertheless, the Commission’s assessment of the second loan was similar to its decision in 2021.  

In both cases, the Commission concluded that the Italian government had not acted as a private operator would have. It did not carry out any prior assessment of the probability of the loan, plus interest, being repaid by the airline. Its main aim was not a profitable investment but the continuity of air services.

The Commission then considered whether the loan qualified as rescue or restructuring aid.

Concerning the 2017 loan, the Commission had concluded that rescue aid did not apply as the loan had not been repaid within six months nor had the airline been liquidated. As for the aid qualifying as restructuring aid, Italy had never submitted a restructuring plan. Thus, the conditions set out in the Guidelines on rescue and restructuring aid were not met.

Regarding the 2019 loan, the Commission stated that the “one time, last time” principle set out in the Guidelines (one rescue and/or restructuring aid per undertaking every 10 years)  was not respected due to the previous 2017 public support. However, it should be highlighted that the Commission had not qualified the 2017 loan as a rescue or restructuring aid.

Consequently, as the loan constituted illegal aid, the Commission decided that Italy must recover the full amount of the loan, plus interest, from Alitalia as from 2019.

This decision has no impact on the numerous aid measures that were authorized by the European Commission in the context of the COVID-19 outbreak.

Note that ITA Airways, which acquired some of Alitalia’s assets in 2021, is not affected by these proceedings as the Commission stated that it could not be assimilated  to Alitalia and thus is an economic successor because of economic discontinuity.