Commission approves €687 million Italian scheme to compensate commercial rail passenger operators for the damage suffered due to the coronavirus pandemic

The European Commission has approved, under EU state aid rules, €687 million Italian support to compensate providers of commercial long-distance rail passenger services for the damage suffered during the period between 1 July 2020 and 30 April 2021 due to the coronavirus pandemic and the restrictive measures that Italy had to implement to limit the spread of the virus.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “This €687 million measure will enable Italy to compensate long-distance rail passenger operators on commercial lines for the damage suffered as a result of coronavirus related restrictions. We continue working closely with Italy and all other member states to ensure that national measures to support all sectors that were hit by the crisis, including the rail sector, can be implemented as quickly as possible, in line with EU rules.”

The Italian support measure

Since the beginning of the pandemic, the Italian government put in place an array of measures to limit the spread of the virus, including notably a mandatory staggered seating reservation system that cut available seats by 50%, severe limitations on business meetings in person and business travels, and the cancellation of events. All these restrictions had a direct negative effect on the mobility of material passenger categories like business and leisure travellers, which are key to the business of long-distance trains. Furthermore, during the period between late December 2020 and April 2021, the government introduced a nationwide ban on interregional travels.

Because of the mandatory restrictions in place, long-distance rail passenger transport operators experienced a drop in transport volumes and revenues. In particular, during the period between 1 July 2020 and 30 April 2021, passenger numbers fell by up to 90% compared to 2019, resulting in a significant drop in revenues for providers of rail passenger services. At the same time, transport operators continued to face various costs, in particular additional expenditures to implement enhanced sanitary and hygiene measures. This led to serious liquidity problems, which risk jeopardising the competitiveness of rail transport operators.  

Under the notified €687 million scheme, eligible beneficiaries will be entitled to receive compensation in the form of direct grants for the damage suffered during the relevant period.

This measure follows a similar scheme that the Commission approved on 10 March 2021 (SA.59346) aimed at compensating commercial rail passenger operators for the damage suffered between 8 March and 30 June 2020.

The Commission assessed the measure under Article 107(2)(b) TFEU, which enables the Commission to approve state aid measures granted by member states to compensate specific companies or specific sectors for the damages directly caused by exceptional occurrences.

The Commission considers that the coronavirus pandemic qualifies as such exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by member states to compensate for damages linked to the outbreak are justified.

The Commission found that the Italian aid scheme will compensate damages that are directly linked to the coronavirus pandemic. It also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damage.

The Commission therefore concluded that the scheme is in line with EU State aid rules.

Background

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under state aid control and do not require the Commission's approval under EU state aid rules. In all these cases, member states can act immediately. When state aid rules are applicable, member states can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework.

On 13 March 2020, the Commission adopted a Communication on a co-ordinated economic response to the COVID-19 outbreak setting out these possibilities.

In this respect, for example:

• Member states can compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
• State aid rules based on Article 107(3)(c) TFEU enable member states to help companies cope with liquidity shortages and needing urgent rescue aid.
• This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by member states immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all member states due the coronavirus outbreak, EU State aid rules allow member states to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State Aid Temporary Framework based on Article 107(3)(b) TFEU to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021, provides for the following types of aid, which can be granted by member states: (i) Direct grants, equity injections, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies; (iii) Subsidized public loans to companies, including subordinated loans; (iv) Safeguards for banks that channel state aid to the real economy; (v) Public short-term export credit insurance;(vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees; (xi) Targeted support in the form of equity and/or hybrid capital instruments; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak; (xiii) Investment support towards a sustainable recovery, and; (xiv) Solvency support.

The Temporary Framework will be in place until 30 June 2022, with the exception of investment support towards a sustainable recovery, which will be in place until 31 December 2022, and of solvency support, which will be in place until 31 December 2023. The Commission will continue to monitor closely the developments of the COVID-19 pandemic and other risks to the economic recovery.

The non-confidential version of the decision will be made available under the case number SA.62394 in the state aid case register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News. More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the Coronavirus pandemic can be found here.

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