In-depth investigation by the European Commission into Danish and Swedish aid to SAS

In August 2020, Denmark and Sweden notified the European Commission of their plans to provide support in the form of recapitalisation measures for the airline SAS.

As a result of pandemic-related travel restrictions, SAS was at risk of default and insolvency.

The recapitalisation involved the following measures:

• subscription of new shares by Denmark and Sweden for approximately EUR 194 million;
• subscription of new shares as part of a rights issue split between Denmark and Sweden for an amount of EUR 292 million; and
• recently issued hybrid securities with a total value of EUR 583 million, equivalent to an equity instrument that is not convertible into shares.    

This aid was notified based on the Temporary Framework for State aid measures to support the economy in the context of the COVID-19 outbreak. This COVID temporary framework, which was adopted at the start of the pandemic on 19 March 2020, underwent several amendments to extend its scope and duration, and expired on 30 June 2022.

On 17 August 2020, the Commission authorised this aid under Article 107,§3, b) TFEU on the basis of the conditions set out in the temporary COVID framework to ensure the compatibility of the recapitalisation measures.

Following an action for annulment brought by Ryanair, the General Court of the EU examined the legality of the Commission's decision and annulled it because the recapitalisation granted to SAS did not contain a mechanism for increasing remuneration and therefore did not meet all the conditions of the Temporary Framework.

Following this ruling, the Commission decided to open an in-depth investigation to examine the recapitalisation measures in greater detail.

The opening of this procedure is the subject of a formal decision which is sent to the States concerned and published in the Official Journal of the EU to allow interested parties (SAS, Ryanair, etc.) to submit their observations on the measures. It is more than likely that the States concerned will propose amendments to the mechanism for increasing remuneration in order to quickly obtain a new positive decision from the Commission.

The Commission has stated that a decision could be taken before the end of the year.

It should be remembered that the Commission's decisions approving aid to TAP and KLM in the context of the pandemic, which had also been annulled by the General Court of the EU, were very quickly replaced by other decisions, still positive but with better reasoning.