The never-ending saga of Alitalia’s attempts to get out of its financial troubles has a new chapter. European Union competition regulators gave a green light to additional €73 million state aid for Alitalia, arguing that the Italian aid is 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.

On December 29, 2020, the European Commission stated that the analysis submitted by Italy had properly identified the losses which Alitalia experienced. The Commission also evaluated that the compensation from the state “does not exceed what is necessary to make good the damage on [particular] routes”, read a statement by the EU competition regulators.

The European Union (EU) Commission has approved a grant worth €200 million for Italian flag carrier Alitalia. The aid should resuscitate the airline and help alleviate the consequences of COVID-19. However, financial struggles had tortured the airline long before the pandemic began.

“The aviation industry continues to be one of the sectors hit particularly hard by the impact of the coronavirus outbreak. This measure enables Italy to provide further compensation for direct damages suffered by Alitalia between June and October 2020 due to the travel restrictions necessary to limit the spread of the coronavirus,” said Margrethe Vestager, the Executive Vice-President of the EU Commission.

The approval for financial injection comes just a few months after the EU Commission’s assent to allocate €200 million of state aid in September 2020. At the time, €200 million state aid was granted, Vestager argued that the state aid covered Alitalia’s losses that were directly related to COVID-19 travel restrictions. According to Vestager, the €200 million grant for Alitalia was “in line with EU State aid rules”.

It is not the first time Alitalia receives financial support. Italy's largest air 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, the carrier was granted another €400 million loan for the same purpose.

A state-appointed administrator of Alitalia said that Italy’s flag carrier needed to be nationalized by the country’s government as soon as possible to remain afloat.

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. 

“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,” commented Vestager in a statement. 

The transport minister of Italy signed the decree under which the government approved the establishment of a new state-owned air carrier which will take over the assets of Alitalia. The new airline is set to be renamed as Alitalia ITA (Italia Transporto Aero) and enter service by 2022.