On 23 April 2018, the European Commission opened an in-depth investigation to determine whether the 900 million euro loan granted to the airline Alitaliacomplies with European Union rules for aid to companies in difficulty.

Under EU rules on State aid, public interventions in favor 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. If this principle is not respected, the public interventions usually confer an economic advantage on the beneficiary that its competitors do not have, and therefore they involve State aid within the meaning of Article 107 of Treaty on the Functioning of the European Union.

Alitalia, an Italian airline owned by the consortium Compagnia Aerea Italiana – CAI(51%) and Etihad Airways(49%), has been in a financial crisis for many years. On 2 May 2017, after Alitalia’s staff rejected a cost-cutting plan and the shareholders refused to provide additional financing to Alitalia, the airline was placed under extraordinary administration in accordance to Italian insolvency law.

During the period of extraordinary administration, Italy granted a 600 million euro bridge loan to Alitaliain May 2017, followed by an additional 300 million euro loan in October 2017. Because of several complaints received by the European Commission in 2017, alleging that the loan constitutes a State aid not compatible with EU rules, in January 2018 Italy notified the total 900 million euro State loan as rescue aid, in accordance with the Guidelineson State aid for rescuing and restructuring non-financial undertakings in difficulty.

Margrethe Vestager, Commissioner for competition, said:“The Commission has a duty to make sure that loans given to companies by Member States are in line with the EU rules on State aid. We will investigate whether this is the case for Alitalia.”

In view of the duration of the loan, that exceeds the maximum period of six months allowed by the Guidelines on rescue and restructuring aid, and of the amount of the aid compared with the effective necessities of the airline, the Commission’s current view is that the State loan may constitute State aid.

Davide Scavuzzo