Alitalia must repay $1.1B in state aid, Commission rules

Alitalia has to repay state aid, but capital injections given to successor Italia Trasporto Aereo (ITA) are in line with market conditions, the European Commission ruled on September 10, 2021. 

Alitalia will cease operations on October 15, 2021, passing the baton to ITA. 

The Commission said two loans granted to struggling flag carrier Alitalia by Italy in 2017, totaling €900 million ($1.1 billion), are illegal under state aid rules.  

“Italy must now recover this amount from Alitalia,” Commissioner Margrethe Vestager said in the ruling. 

Notably, Italy did not act as a private investor when awarding the loans in 2017 by assessing the likelihood that the loans would be repaid. 

“Our assessment of Alitalia’s financial situation in early 2017 showed that repayment was very unlikely – and, as a matter of fact, the loans have not been repaid to this day,” Vestager noted. 

The loans also did not meet state aid guidelines on companies in difficulty because they were not reimbursed within six months and there was no restructuring program in place. 

The Commission said it received a number of complaints from airlines claiming that the loans amounted to unfair aid. 

Italy also awarded Alitalia another loan of €400 million in 2019, prompting further complaints from rival carriers. Vestager said an investigation into that loan was ongoing and a final decision would be made soon. 

However, the commission ruled that ITA is “not the economic successor” of Alitalia and therefore is not liable to repay the illegal state aid received by Alitalia. 

Vestager said that under EU rules, a new company is not liable for past aid if the two companies are sufficiently different from one another, so-called “economic discontinuity.”

ITA meets this definition because it will operate less than half of Alitalia’s aircraft, fly to fewer destinations, and use only a limited number of Alitalia’s slots. In addition, ITA is not taking on Alitalia’s non-aviation business such as ground handling and maintenance, nor is it taking Alitali’s loyalty program. It also has a more sustainable cost structure, the Commission said. 

Vestager also said that the Italian government’s injections of €1.35 billion into ITA do not amount to state aid. 

“The business plan foresees that ITA will be a viable airline, with sustainable costs and staffing, flying to a limited number of destinations with a focus on the profitable routes,” she explained. 

“Today marks a fresh start for Italy’s air transport, which had to overcome many challenges,” Vestager concluded. “Once ITA takes off, it is for Italy and the management of ITA to make use of this opportunity, once and for all. To establish an airline that is viable, operates on an equal footing with its competitors, lives up to sustainability ambitions, and that will be successful for a long time to come.”

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