COVID-19: The European Commission approves a fifth aid to Alitalia

Available languages: FR

On 2 July 2021, the European Commission authorised Italian aid of EUR 39.7 million for Alitalia. This aid measure is intended to compensate Alitalia for the damage suffered on certain routes caused by the COVID-19 pandemic between 1 March and 30 April 2021. This is the fifth aid measure in favour of the airline since the beginning of the pandemic.

Since the beginning of the COVID-19 crisis, Alitalia has received four grants of aid amounting to EUR 310 million in compensation from the Italian State for the damage suffered from 1 March to 15 June 2020, from 16 June to 31 October 2020, from 1 November to 31 December 2020 and from 1 to 31 January 2021 respectively, as a result of the government travel restrictions imposed by Italy and other destination countries in order to limit the spread of COVID-19. These aids were approved by the Commission in decisions of 4 September 2020, 29 December 2020, 26 March 2021 and 12 May 2021 (see in this regard our articles of 26 January 2021, 22 April 2021 and 25 May 2021).

On 2 July 2021, the Commission authorised a fifth Italian aid of EUR 39.7 million for the damage suffered on certain routes for the period from 1 March to 30 April 2021 due to the coronavirus pandemic. This new grant brings the total State aid approved by the EU for Alitalia for the damage caused by the pandemic from March 2020 to the end of April 2021 to almost EUR 350 million.

As with the above-mentioned aid, the Commission has analysed the compatibility of the aid in the light of Article 107.2.b TFEU. This provision allows the Commission to authorise State aid granted by Member States to compensate certain undertakings or sectors for damage caused directly by exceptional occurrences. Since March 2020, the Commission has considered that the coronavirus pandemic constitutes an exceptional occurrence due to its exceptional and unforeseeable nature and its major impact on the economy. This legal basis allows aid to be granted to companies in difficulty, such as Alitalia, which are excluded from the benefit of aid based on the Temporary Framework on State aid measures to support the economy in the current context of the outbreak of COVID-19.

In the present case, the Commission considered that the Italian measure would compensate for the damage suffered by Alitalia which is directly linked to the coronavirus outbreak, since the loss of profitability on routes due to the travel restrictions during the period in question can be considered as damage directly linked to the exceptional event. It also considered that the measure was proportionate, as the route-by-route analysis presented by Italy adequately identifies the damage attributable to the containment measures and therefore the compensation does not go beyond what is necessary to remedy the damage on these routes. The Commission has a restrictive interpretation of the notion of damage that must result from travel restriction measures imposed by States. Thus, simple recommendations not to travel would not allow compensation to be obtained on the basis of this European provision.

Consequently, the Commission has concluded that the new Italian compensation measure is in line with EU state aid rules.

It should be recalled that Alitalia, under provisional administration since its declaration of bankruptcy in April 2017, benefited in May 2017 from a bridging loan of EUR 900 million from the Italian State. At the end of 2019, the airline obtained an additional public loan of EUR 400 million (in this regard, see our article of 9 March 2020). The Commission opened two in-depth investigations in 2018 and 2020 respectively into the two public loans.

Furthermore, it is worth highlighting that since the beginning of the crisis, many airlines have benefited from support measures from their respective States on the basis of Article 107.2.b TFEU. In March and April 2020, the Commission approved the French aid scheme aimed at deferring the payment of certain aviation taxes as well as the Danish and Swedish aid to SAS.

In May 2020, it gave its green light to the public loan guaranteed by the German State in favour of Condor. In August 2020, the Commission also approved under Article 107.2.b TFEU the Romanian state guarantee for Blue Air. In October 2020, the Commission approved the Romanian aid to Tarom. Finally, on 25 June 2021, the Commission approved an aid measure by Belgium in favour of the airline Air Belgium.

The COVID-19 crisis has had a deep and lasting impact on the aviation sector, bringing virtually all airports worldwide to a standstill since March 2020. Indeed, last year, the sector's activity index fell by more than 50%. 

To counter the negative effects of the crisis, the EU and EU Member State governments acted quickly and in a coordinated manner, creating a temporary framework for state aid due to the impact of COVID-19. Within a few months, EU members were able to deploy several financial and economic instruments to provide economic support to the aviation sector.

However, despite the use of an exceptional legal framework allowing the Commission to authorise generous aid to air transport actors, the pace of recovery remains uncertain for the years to come. Indeed, according to IATA forecasts, the capacity of the European aviation sector is likely to be significantly reduced in the medium term, at least until 2023 or even 2024.