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European Commission concludes Italian loans worth €900 million to Alitalia are illegal aid

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The European Commission has concluded that two State loans for an amount of €900 million, granted by Italy to Alitalia in 2017, are illegal under EU State aid rules. Italy must therefore recover the illegal State aid, plus interest, from Alitalia.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Following our in-depth investigation, we reached the conclusion that two public loans worth €900 million granted by Italy to Alitalia gave the company an unfair advantage over its competitors, in breach of EU State aid rules. They must now be recovered by Italy from Alitalia to help restore a level playing field in the European aviation industry.”

Alitalia is an Italian airline, providing domestic and international air transport services, maintenance, ground handling and cargo transportation. It has been loss-making since 2008. In early 2017, Alitalia was in urgent need of liquidity, but it had lost access to credit markets due to its deteriorated financial situation. In order to keep Alitalia operating, in May and October 2017, Italy granted the company two loans for the amount of €600 million and €300 million, respectively. At the same time, Alitalia was placed into special bankruptcy proceedings under Italian bankruptcy law.

On 23 April 2018, the Commission opened a formal investigation to establish whether the two loans were in line with EU State aid rules. This followed (i) a number of formal complaints received by the Commission in 2017 from rival airlines, alleging that Italy had granted unlawful and incompatible State aid to Alitalia, and (ii) Italy’s notification in January 2018 of the State loans as rescue aid under the Commission’s Guidelines on Rescue and Restructuring aid.

Under EU State aid rules, public interventions in favour of companies can be considered free of State aid, when the State acts not as a public authority, but on terms that a private operator would have accepted under market conditions (the market economy operator principle – “MEOP”).