The latest ruling comes after the European Commission said Italy’s previous loans also constituted illegal state aid.
After the European Commission found previous state aid illegal, the former Italian airline Alitalia will have to repay the Italian Government a €400 million ($430 million) loan. The governing body found that the 2019 State loan granted by Italy to and its wholly-owned subsidiary, Alitalia CityLiner, breached EU state aid rules and must be repaid with interest.
The ruling does not affect ITA Airways, which acquired some of Alitalia’s assets in 2021. The EU competition authorities specified today that ITA is the economic successor of Alitalia and is not liable to repay the illegal State aid received by Alitalia.
The matter began in May 2017, when Italian airline Alitalia entered special bankruptcy proceedings, which allowed it to continue operating as an airline. The Government granted Alitalia loans for €900 million in 2017 and €400 million in 2019. Both loads are still outstanding.
What about the previous loans?
The European Commission first opened a formal investigation in 2018 to establish whether two loans granted in 2017 worth €900 million were in line with EU State aid rules. In February 2020, the Commission opened an investigation into the second round of loans and accounted the following year that the 2017 payments were illegal and must be repaid.
Today’s decision was expected and hinged on the fact that the Commission believes that in handing out the loan, Italy did not assess the probability Alitalia could repay the loans in advance as a private operator would have. Instead, it found the State aimed to ensure uninterrupted service of Alitalia’s domestic and international network.
In today’s statement, the Commission found that the 2019 payments could not count as rescue aid under the EU’s Rescue and Restructuring Guidelines. The second loan breached the one-time-last-time requirement to qualify for state aid. The Commission furthermore found that Italy did not do its due diligence assessing the airline’s creditworthiness and gave the carrier an unfair advantage:
“No private investor would have granted the loan to the company at the time and that the loan gave Alitalia an unfair economic advantage vis-à-vis its competitors on national, European and world routes, which amounted to incompatible State aid.
Photo: Shutterstock / Davide Calabresi
Successive governments contributed an estimated €10 billion ($10.78 billion) to Alitalia to keep running as it reached the end of its life. The carrier flew its last flight from Rome’s Fiumicino Airport to Cagliari in October 2021.
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How will the airline repay it?
The airline will now be responsible for repaying both debts plus interest. Italian Economy Minister Giancarlo Giorgetti said the EU executive’s decision was expected and widely foreseen and confirmed that the loan repayment request does not concern Alitalia’s successor ITA Airways. The current Italian carrier only maintains a portion of its predecessor’s fleet and conducts an all-Airbus operation.
Atalia also has some assets of its own that can be liquidated to pay its creditors. The airline’s administrators will receive the funds from any aircraft it owns outright and the sale of its loyalty program and brand, which went to ITA Airways for €90 million ($105 million at the time). European Commission spokesperson Arianna Podesta conveyed the loan can be registered as a liability under Alitalia’s ongoing insolvency proceedings:
“The 400 million will be repaid by Alitalia within the limits of the revenues obtained from the sale of the assets of the company and the value of any remaining assets.”
ITA Airways recently celebrated the first anniversary of its new loyalty program, Volare, on March 1st. The new program did not automatically include any of Alitalia’s members as part of the deal but has since reached one million members.
Source: Reuters, European Commission
Source: simpleflying.com
