In December 2012, Estonia notified to the Commission its plan to grant a rescue loan of 8.3 million euros to Estonian Air.
The European Commission has opened an in-depth investigation into a number of public support measures granted by Estonia in favour of its flag carrier airline Estonian Air. At this stage, the Commission has doubts whether these measures are in line with EU state aid rules. The opening of an in-depth investigation gives interested third parties an opportunity to comment on the measures under assessment. It does not prejudge the outcome of the investigation.
Estonian Air has registered significant losses since 2006. In December 2012, Estonia notified to the Commission its plan to grant a rescue loan of 8.3 million euros to Estonian Air. The Commission has doubts that the rescue loan for Estonian Air is in line with the provisions of the EU guidelines on aid for the rescue and restructuring of companies. According to these rules, companies in difficulty can receive rescue aid only once over a period of ten years (according to the so-called “one time last time” principle).
Indeed, Estonian Air already benefitted from three capital injections of 7.3 million euros (in 2009), 19.9 million euros (in 2010) and 30 million euros (in 2011-2012) respectively. These measures were not notified to the Commission. While private shareholders participated in the 2009 and 2010 capital injections, the 2011-2012 injection was carried out exclusively by the State. Moreover, the sale in 2009 of Estonian Air’s groundhandling business to the State-owned Tallinn Airport may have involved state aid to Estonian Air.
At this stage, the Commission has doubts that these four previous measures were carried out on terms that a private player operating under market conditions would have accepted. If they were not, they would involve state aid in the meaning of EU rules. The Commission will now investigate to either confirm or infirm these doubts. Should it be confirmed that one or more of the previous measures involve state aid, the Commission will then examine whether the aid can be found compatible with EU rules, in particular with the rules applying to the airline industry and to companies in difficulty.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
