Connect with us

Aviation/airlines

Commission approves €133 million Portuguese liquidity support to #SATA airline; opens investigation into other public support measures

Published

on

The European Commission has approved, under EU state aid rules, €133 million in liquidity support to SATA Air Açores (SATA). The aid will allow the company to fulfil its public service obligations, provide essential services and ensure the connectivity of the Azores outermost region. At the same time, the Commission has opened an investigation to assess whether certain public support measures by Portugal in favour of the company are in line with EU rules on State aid to companies in difficulty.

SATA is an air transport company ultimately controlled by the Portuguese Autonomous Region of Azores. Together with another company belonging to the same group (SATA Internacional – Azores Airlines), SATA provides air transport passenger and cargo services within Azores, and from and to several national and international destinations. With respect to certain routes, it has been entrusted with a public service obligation to ensure connectivity of the islands. SATA also provides other essential services, e.g. the management and operation of five small airports in different islands of Azores.

SATA has been facing financial difficulties already before the coronavirus outbreak, i.e. on 31 December 2019. Since at least 2014, the company has been experiencing operating losses and has reported negative equity in recent years, which has been aggravated by the effects of the coronavirus outbreak. The company is currently facing urgent liquidity needs.

The Portuguese liquidity support measure

Portugal notified the Commission of its intention to grant urgent support to SATA, with the aim of providing the company with sufficient resources to address its urgent and immediate liquidity needs until the end of January 2021.

SATA is not eligible to receive support under the Commission's State aid Temporary Framework, aimed at companies that were not already in difficulty on 31 December 2019. The Commission therefore has assessed the measure under other state aid rules, namely the 2014 Guidelines on State aid for rescue and restructuring. These enable member states to grant temporary liquidity aid to providers of services of general economic interest to maintain and preserve essential services such as, for example air transport connectivity and airport management. This possibility is available also in case of aid granted  by the member state to the same company in difficulty being investigated by the Commission.

The Portuguese authorities estimated that SATA's liquidity needs for the next six months in relation to SATA's public service obligations and essential services amount to approximately €133m.

The Commission found that the individual aid to the company in the form of a public guarantee of up to approximately €133m on a temporary loan strictly relates to urgent liquidity needs linked to the provision by SATA of essential services including routes subject to public service obligations and services of general economic interest at local airports. It found that the aid is necessary to allow the company to continue providing these services.

On this basis, the Commission approved the measure under EU State aid rules.

Opening of investigation into other support measures

Separately, the Commission has decided to open an investigation to assess whether certain public support measures in favour of SATA are in line with the 2014 Guidelines on state aid for rescue and restructuring.

As of 2017, the Autonomous Region of Azores, which wholly owns SATA, approved three capital increases to partly address the company's capital shortfalls. Most of the amounts appear to have already been paid. The Portuguese authorities claim that the capital increases in question do not constitute state aid under EU rules as since the Regional Government of Azores, as the sole shareholder of SATA, acted as a private investor operating under market conditions.

The Commission will now investigate further if the capital increases constituted state aid that should have been notified to the Commission, and, if so, if the past support measures satisfy the conditions of the 2014 Guidelines on State aid for rescue and restructuring. The opening of an in-depth investigation gives Portugal and other interested parties an opportunity to submit comments. It does not prejudge the outcome of the investigation.

Background

The Azores Autonomous Region is an archipelago composed of nine volcanic islands and 245,000 inhabitants. The Azores Region is considered as an outermost region of the European Union, located in the North Atlantic Ocean, about 1,400 km from mainland Portugal. The islands can be reached from the mainland in two to three days by sea or two hours by plane. The Region is dependent of air transport for passengers and cargo, especially during the winter season, when weather conditions often render maritime transport unavailable.

Under EU State aid rules, public interventions in favour of companies can be considered free of state aid when they are made on terms that a private operator would have accepted under market conditions (the market economy operator principle - MEOP). If this principle is not respected, the public interventions involve state aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, because they confer an economic advantage on the beneficiary that its competitors do not have. The assessment criteria for public interventions in companies in difficulty are set out in the 2014 Guidelines on state aid for rescue and restructuring.

Under the Commission's 2014 Guidelines on state aid for rescue and restructuring, companies in financial difficulty may receive State aid provided they meet certain conditions. Aid may be granted for a period of up to six months ("rescue aid"). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved ("restructuring aid"). The plan must ensure that the long-term viability of the company is restored without further State support, that the company contributes to an adequate level to the costs of its restructuring and that distortions of competition created by the aid are addressed through compensatory measures.

By ensuring compliance with these conditions, the Commission maintains fair and effective competition between different companies in the air transport market, like in other sectors.

Article 349 of the Treaty on the Functioning of the European Union recognises the specific constraints of the outermost regions and provides for the adoption of specific measures in EU legislation to help these regions address the major challenges they face due to their remoteness, insularity, small size, difficult topography and climate, and economic dependence on a reduced number of products.

The non-confidential version of the decision will be made available under the case number SA.58101 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved. State aid decisions newly published in the Official Journal and on the internet are listed in the State Aid Weekly e-News.

 

Aviation Strategy for Europe

Aviation: EU and ASEAN conclude the world's first bloc-to-bloc Air Transport Agreement

Published

on

The European Union and the Association of Southeast Asian Nations (ASEAN) have concluded negotiations on the ASEAN-EU Comprehensive Air Transport Agreement (AE CATA). This is the world's first bloc-to-bloc air transport agreement, which will bolster connectivity and economic development among the 37 member states of ASEAN and the EU. Under the agreement, EU airlines will be able to fly up to 14 weekly passenger services, and any number of cargo services, via and beyond any ASEAN country, and vice versa. 

Transport Commissioner Adina Vălean said: “The conclusion of this first-ever ‘bloc-to-bloc' air transport agreement marks an important milestone in the EU's external aviation policy. It provides essential guarantees of fair competition for our European airlines and industry, while strengthening reciprocal prospects for trade and investment in some of the world's most dynamic markets. Importantly, this new agreement also provides us with a solid platform to continue promoting the high standards on safety, security, air traffic management, environment and social matters going forward. I am grateful for the constructive approach of all parties involved, which made this historic deal possible.” 

The Agreement will help rebuild air connectivity between ASEAN countries and Europe, which has decreased sharply due to the COVID-19 pandemic, and open up new growth opportunities for the aviation industry in both regions. Both parties expressed intent to maintain regular discussions and close coordination to minimise disruptions to air services caused by the pandemic. ASEAN and the EU will now submit the AE CATA for legal scrubbing in preparation for signature at a later date. A joint statement on the Conclusion of the ASEAN-EU Comprehensive Air Transport Agreement (AE CATA) has been published here

Continue Reading

Aviation/airlines

EU bans Belarusian carriers from its airspace and airports

Published

on

The Council today (4 June) decided to strengthen the existing restrictive measures in relation to Belarus by introducing a ban on the overflight of EU airspace and on access to EU airports by Belarusian carriers of all kinds.

EU member states will deny Belarusian air carriers (and marketing carriers who have a codeshare with a Belarusian carrier) permission to land in, take off from or overfly their territories.

Today’s decision follows up on the European Council conclusions of 24 and 25 May 2021, in which EU heads of state and government strongly condemned the unlawful forced landing of a Ryanair flight in Minsk on 23 May 2021 endangering aviation safety.

The downing of the Ryanair flight in Minsk was carried out with the express intent of detaining journalist Raman Pratasevich who has been critical of Lukashenko’s regime and his girlfriend Sofia Sapega.

The Council is also assessing possible additional listings of persons and entities on the basis of the relevant sanctions framework, and further targeted economic sanctions.

Continue Reading

Aviation/airlines

EU to blacklist Belarus airline ahead of economic sanctions, diplomats say

Published

on

By

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium May 5, 2021. REUTERS/Yves Herman

The European Union is preparing sanctions on Belarus' national airline and around a dozen top Belarusian aviation officials, three diplomats said, a stop-gap measure before economic sanctions following the forced landing of a passenger plane, writes Robin Emmott.

The proposed asset freezes and travel bans are part of a package of new sanctions on Belarus from EU states, which are outraged that a Ryanair flight was pressed to land in Minsk on 23 May to arrest a dissident journalist and his girlfriend.

EU governments, which described the incident as state piracy, say they are looking at targeting sectors that play a central role in the Belarus economy, to inflict real punishment on President Alexander Lukashenko. They could include bond sales, the oil sector and potash, a big Belarusian export.

Before imposing such economic sanctions, the bloc is expected to agree by June 21 - when EU foreign ministers meet - a smaller sanctions list on individuals and two entities as a quick, intermediary response, the diplomats said.

"All EU states agree with this approach," one diplomat said. A second diplomat said there would be "a clear signal for Lukashenko that his actions were dangerous and unacceptable".

While the sanctions are still under discussion, EU ambassadors as early as Friday could pre-approve banning overflights and landing in EU territory by Belarus airlines, allowing EU ministers to formally sign off on them later in the month.

Britain, no longer part of the EU, has suspended the air permit for Belarus' national carrier, Belavia. The EU is expected to do the same, the diplomats said.

The names are expected to include top Belarus' defence and transport ministry officials, military from the airforce, a top Minsk airport official and a senior civil aviation official, the diplomats said.

Also to be blacklisted and banned from business with the EU is another state-owned enterprise from the aviation sector.

More details were not immediately available. The EU does not comment publicly on ongoing preparations for sanctions.

Lukashenko said last week the journalist pulled off the plane had been plotting a rebellion, and he accused the West of waging a hybrid war against him. Read more

Since cracking down on pro-democracy protests last year, he has withstood three previous rounds of EU sanctions and comparable U.S. measures - mainly blacklists that bar officials from travelling to or doing business in Europe and the United States.

EU foreign ministers said last week that fresh sanctions would include a fourth round of travel bans and asset freezes linked to a disputed presidential election in Belarus last August. The around a dozen names are separate and directly linked to the Ryanair incident.

Continue Reading
Advertisement

Twitter

Facebook

Advertisement

Trending