Hi, How Can We Help You?

Blog

April 5, 2023

EU: Italian Airline Alitalia Must Refund €400 Million of Illegal

The European Commission has established that the €400 million loan of the Italian state to Alitalia in 2019 was illegal aid, stating that Italy must now recover the funds it gave to the already bankrupt airline.

Through a statement issued on March 27, the EU Commission has revealed that the Italian airline Alitalia entered into special bankruptcy procedures under the Italian bankruptcy law, while at the same time continuing to figure as an operating airline, SchengenVisaInfo.com reports.

According to the authority, in 2017 and 2019, Alitalia had already benefited from two loans worth €900 million, which were never repaid and were declared illegal by Brussels in 2021.

In 2018, the Commission opened an official investigation to determine whether two loans granted in 2017 of €900 million were in line with EU state aid rules.

The Commission also opened an investigation in February 2020 for the loan granted in 2019 regarding the compliance of this loan with the EU rules on state aid. In September 2021, the EU Commission concluded that these state loans to Alitalia were illegal under EU rules.

“Today the Commission has concluded that, when granting the €400 million State aid loan in 2019, Italy did not act like as a private operator would have done,” the statement reads.

According to the Commission, Italy has not assessed in advance the probability of the airline being able to repay the loans, plus interest, intending to ensure the uninterrupted service of Alitalia’s domestic and international flights.

Moreover, the EU Commission has found that the aforementioned aid could not be approved as rescue aid according to the guidelines for rescue and restructuring aid.

Based on this conclusion, the airline Alitalia had already benefited from the previous aid, aside from the two loans granted in 2017. Thus, the new loan would be contrary to the request of the last time under the Rescue and Restructuring Guidelines.

In addition, the Commission has also concluded that no private investor would have given a loan to the company at that time. The same emphasised that the loan gave Alitalia an unfair economic advantage over its competitors on national, European and world lines.

At the same time, the Commission revealed that in September 2021, ITA Airways, the new company that replaced Alitalia on October 15, 2021, had bought some of Alitalia’s assets this year, thus it is not obliged to repay the illegal state aid received from Alitalia.

In September 2020, the European Commission approved Italian support of €199.45 million for the airline Alitalia, emphasising at the time that it is in line with EU state aid rules. The approved sum was intended to compensate the airline for the damages caused by the COVID-19 pandemic.

Meanwhile, after one year, the Commission again granted a total of €73.02 million in aid to Alitalia in order to compensate the main airline operating in Italy for the damages caused to 19 routes as a result of COVID-19 from June 16 to October 31, 2020.

However, in September 2021, the Commission came to the conclusion that most of the €900 million loan granted in 2017 by the Italian government to the Alitalia airline is illegal and does not comply with the EU rules for state aid.

>> Italy’s Biggest Airline Ends Its Operations From October 15 Due to Financial & Coronavirus Crisis