Another lifeline for Alitalia: EU approves €24.7 million state aid
An Italian air carrier Alitalia is about to receive €24.7 million as an additional support measure from the government of Italy to mitigate financial damages the airline suffered on certain routes due to the COVID-19 outbreak between November 1 and December 31, 2020.
The government of Italy has notified the European Commission of its intention to provide an additional €24.7 million aid to compensate Alitalia for the financial loss it suffered due to air travel restrictions implemented to control the spread of the virus during the period. The EU Commission has approved the aid, considering that the virus outbreak could be qualified as “an exceptional occurrence” and “an extraordinary, unforeseeable event” that has heavily affected the Italian air carrier.
“As a result, exceptional interventions by the Member State to compensate for the damages linked to the outbreak are justified,” written in the Commission's announcement.
The route-by-route analysis submitted by Italy identified that the damage to Alitalia is attributable to the containment measures. On this basis, the Commission concluded that the loss of profitability on certain of Alitalia's routes is directly linked to the virus outbreak and the compensation is proportionate to the damage and goes in line with the EU State aid rules.
“The coronavirus crisis and restrictions to limit the spread of the virus are continuing for longer than we all hoped for. The measure approved today enables Italy to provide further compensation for direct damages suffered by Alitalia between November and December 2020 as a result of such restrictions,“ the Executive Vice-President Margrethe Vestager, in charge of competition policy at EU Commission, confirmed.
“We continue working closely with the Member States to ensure that national support measures can be put in place in a coordinated and effective way, in line with EU rules. At the same time, our investigations into past support measures to Alitalia are ongoing and we are in contact with Italy on their plans and compliance with EU rules,” she added.
It is not the first time Alitalia receives financial support. In December 2020, the EU Commission gave a green light to €73 million state aid arguing that the Italian aid was proportionate to significant operating losses which the airline suffered on 19 routes during four months between June 16 and October 31, 2020, due to the COVID-19 pandemic downturn in air travel demand. In September 2020, Italy's largest air carrier also received €200 million of state aid without regard to the fact it had been loss-making even before the pandemic hit the aviation industry.
Meanwhile, in October 2020, the transport minister of Italy signed the decree under which the government approved the establishment of a new state-owned air carrier that will take over the assets of Alitalia. The new airline is set to be renamed Alitalia ITA (Italia Transporto Aero) and enter service by 2022. However, before starting operations in 2022, the management of the new Alitalia ITA has to prepare a business strategy to ensure an economic discontinuity from previous Alitalia. The new business strategy will also need to be approved by the European Commission.
The Italian flag carrier filed for bankruptcy in 2017. Over time, there were several attempts to reanimate the struggling airline by injecting funds. In 2017, Alitalia received almost €900 million in loans for the restructuring process. Two years later, in 2019, the carrier was granted another €400 million loan for the same purpose.
However, the large amounts of financial support raised doubts about whether the airline’s restructuring process was being carried out according to the law. Due to a mass of complaints about competition policy issues, the EU Commission opened a formal investigation procedure on €900 million loans in 2018 and a separate formal investigation procedure on a €400 million loan in October 2019.
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