On 29 October 2019, the European Commission (“Commission”) opened an in-depth investigation into various financing measures totalling EUR 21 million granted by Hungarian public entities to Malév Ground Handling (“Malév GH”) following a complaint lodged in 2017 by Budport, a competing private company.
Malév GH, a former subsidiary of the Hungarian flag carrier Malév, declared bankrupt in 2012, is currently owned by MNV Zrt., the agency in charge of Hungarian State assets. Malév GH operates on the ground handling market at Budapest Airport. Following financial difficulties resulting from the bankruptcy, MNV Zrt., the Hungarian Development Bank (MFB) and Tiszaviz, another State-owned undertaking, granted several funding measures to Malév GH.
To determine whether such state intervention constitutes State aid, the Commission has to establish whether it provide the beneficiary with an economic advantage that its competitors do not have. In this context, it must verify whether such financing complies with the market economy private operator principle.
After its preliminary investigation, the Commission cast doubt on whether five financing measures taken for Malév GH in the form of loans, capital increases or debt to equity conversions comply with this principle of private operator, and the Commission considers at this stage that these measures could constitute illegal and incompatible State aid. The measures could be authorised as restructuring aid to a company in financial difficulty, but the Commission doubts whether the conditions laid down in the 2014 Guidelines are met.
Consequently, during its in-depth investigation the Commission will have to consider whether the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty apply. Under these Guidelines, Member States can grant rescue and/or restructuring aid to companies in financial difficulty under specific conditions.
A company is considered to be in financial difficulty when it is almost certain that, without State intervention, it will almost certainly go out of business in the short or medium term. The financial conditions that need to be met under this definition depend on the undertaking’s legal form.
For further information on this topic, please refer to our previous article explaining the factors that should be considered by a Member State willing to grant rescue aid according to the Guidelines.
The Commission's decision to open the formal procedure was sent to the Hungarian State, which has one month to respond. It will be published in the coming months in the Official Journal of the EU. Through this publication, the Commission will invite interested third parties to submit their comments, which will be forwarded to the Hungarian State for its response.
The Commission’s official press release is already available to read.