COVID-19: the European Commission clears 800 million EUR Italian compensation scheme for airports and groundhandlers

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On 26 July 2021, the European Commission authorised a damage compensation scheme for Italian airports and groundhandlers in the context of the COVID-19 outbreak. The scheme of direct grants has an estimate budget of 800 million EUR and aims at compensating the damage suffered due to the COVID-19 outbreak between March 2020 until 30 June 2020 or 14 July 2020, depending on the travel restrictions affecting the beneficiary's activities. Italy notified the measure to compensate damage caused by an exceptional occurrence under Article 107.2, b) of the TFEU. In order to ensure the potential beneficiaries’ eligibility for the aid, both types of actors should be in the possession of a valid operating certificate for the provision of their respective services.

Italy has been somewhat of an outlier at first, being one of the countries severely hit in the first wave of the challenges created amid the COVID-19 pandemic. The aid measure consequently aims at compensating the damage suffered between 1 March and 30 June 2020 or 14 July 2020, depending on when the beneficiaries could resume their activities following the lockdown and various travel restriction imposed by the Italian State. In trying to limit the massive impact the pandemic has had on health care services, Italy namely suspended flights from a large number of countries, imposed mandatory quarantines and other restrictive measures such as prohibiting non-essential travel, after formally declaring a state of emergency on 31 January 2020.

In order to ensure that the aid granted remains proportional with regard to the damage caused by the exceptional occurrence, the Italian authorities will have to prevent cumulation and overcompensation with other State aid instruments when the same type of losses suffered are concerned. Indeed, compensation obtained via State aid instruments, whether already received or merely in the planning stage, will be taken into account in determining the potential beneficiaries’ eligibility threshold.

In substance, the net losses are quantified as the difference between the profits and losses incurred from 1 March 2020 up to 30 June 2020 or 14 July 2020 and those incurred during the same period in 2019 while taking into account the following elements for the actual calculation: (i) loss of revenue minus (ii) avoided costs plus (iii) additional costs related to COVID-19, e.g. the purchase of testing equipment.

Interested potential beneficiaries will have to submit an application for support to the Italian Directorate General for airports and air services of the Ministry of Infrastructure and Sustainable Mobility, who will forward them to the ENAC, the Italian Civil Aviation authority. The ENAC will then determine the amount of eligible damages suffered by each beneficiary, after which the Directorate General for airports and air services must approve the envisaged amount. After obtaining said approval, ENAC will pay the compensation to each beneficiary according to the amounts validated.

Clearly, this authorisation follows the generally favourable approach of the European Commission towards State aid to the benefit of the aviation industry in the context of the pandemic. Many other airlines, such as Air Belgium, SAS, Finnair, Condor, Blue Air, Alitalia, Tarom or even Aegean Airlines, have received State aid measures on the basis of Article 107.2 b) of the TFEU for the damage they suffered as a result of the pandemic, as well as several airport operators (see in this regard our article of 16 March 2021) and groundhandler Aviapartner.