COVID-19: European Commission approves Finnish aid for Finavia

Europe
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On 17 March 2021, the Commission approved a Finnish scheme to support airport operator “Finavia” in the context of the coronavirus crisis.

Like many other airport operators, Finavia suffered a significant decrease of revenues in 2020, due to significantly lower demand and restrictions imposed by Finland and other European countries to limit the spread of COVID-19.

The Finnish state support, consisting of three forms of aid, for a total budget of 350 million EUR is intended to compensate Finavia for the damage suffered as a result of the health crisis as well as to provide it with sufficient liquidity to continue its activities during and after the pandemic.

First, Finland notified aid of 68 million euros, in the form of a capital injection, to compensate the company for the damage suffered as a result of the COVID-19 epidemic under Article 107, paragraph 2, point b), of the TFEU. This legal basis allows the Commission to declare compatible with the internal market aid to remedy to the damage caused especially by an “exceptional occurrence”. As of 13 March 2020, the Commission declared the COVID-19 epidemic to be such an occurrence because of its exceptional and unpredictable nature, as well as its major repercussions on the economy. It further clarified the application of this provision in the Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak. It should be remembered that in the air transport sector, only the damage resulting from a fall in passengers due to restrictive measures imposed by the States can be compensated.

The Commission examined the proposed aid and considered that it satisfied the conditions of Article 107, paragraph 2, point b) of the TFEU (see our article of 19 March 2020 concerning the conditions to obtain a compensation for exceptional occurrence). In particular, the measure will only compensate for the damage directly linked to the COVID-19 crisis, without the possibility of overcompensation, as a recovery mechanism is foreseen under which any public support exceeding the damage actually suffered by Finavia must be reimbursed to the Finnish State, and so ensuring the proportionality of the measure.

Finland also notified to the Commission a recapitalisation measure in the form of a capital injection of 249 million EUR as well as a subordinated loan of 33 million EUR.

These two measures were notified on the basis of the Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak, adopted by the Commission in March 2020 and since amended five times (see our article of 3 February 2021 concerning the last modification and extension of the Framework). These aid measures are therefore based on Article 107, paragraph 3, point b) of the TFEU which allows the Commission to authorise aid to remedy serious disturbances in the economy of a Member State.

As regards the recapitalisation measure, the Commission considered that it satisfied the conditions set out in the Temporary Framework. The measure will not exceed the minimum needed to ensure the viability of Finavia and will not go beyond the restoration of its capital position before the coronavirus. Finland will receive an appropriate remuneration for this investment and the notified aid also provides for mechanisms to incentivise Finavia to repay the State participation obtained as a result of the recapitalisation. In addition, until at least 75% of the recapitalisation is repaid, a strict limit on the remuneration of the members of Finavia's management will apply, including a ban on the payment of bonuses, and the company may not acquire a stake of more than 10% in competitors or other operators in the same line of business. Finally, Finavia will have to publish information on the use of the aid received, including on how the use of that aid supports its activities in accordance with European and national obligations linked to the green and digital transformation. The Commission therefore considered that the measure satisfied the conditions set out in the Temporary Framework, more specifically in its section 3.11.

As for the measure granted in the form of a subordinated loan, the Commission considered that it also satisfied the conditions set out in the Temporary Framework on subsidised loans. Indeed, the loan will last for a maximum of six years,  be granted before 1 December 2021 and the expected interest rate will guarantee a minimum remuneration in accordance with the requirements of the aforementioned Framework.

It should be noted that although many aids have already been granted to airlines, both on the basis of Article 107, paragraph 2, point b) of the TFEU (see in particular our article on aid in favour of Alitalia) and on the basis of the Temporary Framework, aid to airports are to this day still limited. At the end of November 2020, the Commission had approved aid in favour of Hermes Airports Limited. At the beginning of March, the Commission also adjudicated on aid for operators of airports located in Riga, Pisa and Florence.

With the aviation sector being one of the most impacted by the COVID-19 pandemic further aid to airlines and airport operators may still be expected.