COVID-19: the European Commission authorizes the third Italian aid to Alitalia in the context of the pandemic

On 26 March 2021, the Commission authorized a third Italian aid of 24.7 million EUR in favour of Alitalia as compensation for the damage suffered as a result of the pandemic due to the restrictions imposed with respect to certain routes between 1 November and 31 December 2020.

Since the beginning of the COVID-19 crisis, Alitalia has received two grants of 272 million EUR in compensation from the Italian State for the damage suffered respectively from 1 March to 15 June 2020 and from 16 June to 31 October 2020 as a result of government travel restrictions imposed by Italy and other destination countries in order to limit the spread of the coronavirus. These aids were approved by the Commission in decisions of 4 September 2020 and 29 December 2020 (see in this regard, our article of 26 January 2021).

On 26 March 2021, the Commission authorized a third Italian aid of 24.7 million EUR for the damage suffered on certain routes between 1 November and 31 December 2020 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 to December 2020 to almost 300 million EUR.

The compatibility of the aid was examined in the light of Article 107(2)(b) TFEU, which allows the Commission to authorize state aid granted by Member States to compensate certain undertakings or sectors for damage caused directly by extraordinary events. Since March 2020, the Commission has considered the coronavirus pandemic as an extraordinary event due to its exceptional and unforeseeable character 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 for State aid measures to support the economy in the current context of the outbreak of COVID-19.

In this case, the Commission considered that the Italian measure would compensate for the damage suffered by Alitalia which is directly linked to the coronavirus epidemic, since the loss of profitability on the 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, since 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 the amount necessary to remedy the damage suffered on these routes. The Commission has a restrictive interpretation of the concept of damage that must result from travel restriction measures imposed by the 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 must be recalled that Alitalia, which has been under provisional administration since its declaration of bankruptcy in April 2017, received a 900 million EUR bridge loan from the Italian state in May 2017. At the end of 2019, the airline obtained an additional public loan of 400 million EUR (in this regard, see our article of 9 March 2020). Both public loans are currently the subject of in-depth investigations by the Commission, which were opened in 2018 and 2020 respectively.

In addition, it is worth noting 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 aid granted by Denmark and Sweden to the airline SAS. In May 2020, the Commission gave its green light to the public loan guaranteed by the German State in favour of Condor. Finally, in August 2020, the Commission also approved, on the basis of article 107.2b) of the TFEU, the public guarantee of Romania in favour of the airline Blue Air. Finally, in October 2020, the Commission approved the Romanian aid to Tarom.

Almost one year after the start of the coronavirus crisis, the aviation industry continues to be one of the sectors particularly affected by the impact of the coronavirus epidemic. Despite the use of an exceptional legal framework allowing the Commission to authorize generous aid to air transport actors, it is more than likely that the aviation sector will take several years to recover its pre-COVID-19 level of activity. Indeed, according to IATA forecasts, the capacity of the European airline sector is likely to be greatly reduced in the medium term, at least until 2023 or even 2024.