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

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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/airlines

#Aviation - Statement by Commissioner Vălean on the Commission's intention to extend the slot waiver 

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Transport Commissioner Adina Vălean has issued a statement following the adoption of the Commission report on the potential extension of the Slot Regulation amendment

Commissioner Vălean said: “The report shows that air traffic levels remain low, and more importantly, they are not likely to recover in the near future. In this context, the lack of certainty over slots makes it difficult for airlines to plan their schedules, making planning difficult for airports and passengers. To address the need for certainty and responding to traffic data, I intend to extend the slot waiver for the 2020/2021 winter season, until 27 March 2021.”

The full statement is available online.

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Aviation/airlines

Commission approves €62 million Romanian loan guarantee to compensate Blue Air for damage suffered due to #Coronavirus outbreak and provide the airline with urgent liquidity support

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The European Commission has approved, under EU state aid rules, a Romanian loan guarantee of up to around €62 million (approximately RON 301m) in favour of Romanian airline Blue Air. Blue Air is a private Romanian airline with bases in Romania, Italy and Cyprus. It qualified as a company in difficulty before the coronavirus outbreak, i.e. on 31 December 2019. More specifically, the company was loss making due to the extensive investments it undertook since 2016 to improve its network of routes. The airline had returned to profitability in 2019 and early 2020, but it suffered significant losses due to the coronavirus outbreak.

The measure consists of a public guarantee of up to around €62m on a loan to the airline which will be allocated as follows: (i) around €28m public guarantee to compensate Blue Air for the damage directly caused by the coronavirus outbreak between 16 March 2020 and 30 June 2020; and (ii) around €34m rescue aid in the form of a public guarantee on a loan intended to partly cover Blue Air's acute liquidity needs as a result of the high operating losses it has been experiencing following the coronavirus outbreak. Blue Air 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, in line with the notification by Romania. With respect to the damage compensation, the Commission assessed the measure under Article 107(2)(b), which enables the Commission to approve state aid measures granted by member states to compensate specific companies for the damages directly caused by exceptional occurrences, such as the coronavirus outbreak.

As regards the rescue aid, the Commission assessed it under the Commission's 2014 Guidelines on state aid for rescue and restructuring, which enable member states to support companies in difficulty, provided, in particular, that the public support measures are limited in time and scope and contribute to an objective of common interest. The Commission therefore concluded that the Romanian measure is in line with EU state aid rules.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The aviation sector has been severely hit by the coronavirus outbreak. This €62m Romanian loan guarantee will in part enable Romania to compensate Blue Air for the damage suffered as a result of the coronavirus outbreak. At the same time, it will provide the airline with the necessary resources to address part of its urgent and immediate liquidity needs. This will avoid disruptions for passengers and ensure regional connectivity in particular for the significant number of Romanian citizens working abroad and for many small local businesses that depend on affordable tickets offered by Blue Air on a network of routes aimed at addressing their specific needs. We continue working with member states to discuss possibilities and find workable solutions to preserve this important part of the economy in line with EU rules.”

A full press release is available online.

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Aviation Strategy for Europe

Commission approves €4.4 million Bulgarian support measure to Burgas and Varna airports in the context of the #Coronavirus outbreak

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The European Commission has approved a €4.4 million Bulgarian support measure to Burgas and Varna airports in the context of the coronavirus outbreak. The measure was approved under the state aid Temporary Framework. The public support will take the form of a deferral of the payments of the concession fees due by Fraport Twin Star Airport Management AD, the company managing the two airports, to the Bulgarian government which owns the airports' infrastructures.

The purpose of the measure is to help the two airports addressing the liquidity shortages that they are facing due to the coronavirus outbreak, by reducing the costs borne by the airport operator. The Commission found the measure to be in line with the conditions set out in the Temporary Framework.

In particular, the payment deferral may only be granted until the end of this year and its duration will be for one year. Furthermore, the payment deferral involves minimum remuneration in line with the Temporary Framework.

The Commission therefore concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here.

The non-confidential version of the decision will be made available under the case number SA.58095 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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