EU orders Rome to recover "illegal state aid" from Alitalia airline

The European Commission on Friday concluded that two state loans totaling 900 million euros (1.064 billion U.S. dollars) granted by Italy to its ailing airline Alitalia in 2017 constituted "illegal state aid" and ordered Rome to recover the amount, plus interest ,reported Xinhua.

The Commission's Executive Vice-President, Margrethe Vestager, who is in charge of competition policy, said in a statement that an in-depth investigation found that two loans of 600 million euros and 300 million euros Italy gave Alitalia gave the company an unfair advantage over its competitors in breach of the European Union's (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," she said.

Alitalia has been making losses since 2008. In early 2017, the company was in urgent need of liquidity but had lost access to credit markets due to its deteriorated financial situation. To keep Alitalia afloat, Italy granted the company two loans in May and October 2017. At the same time, Alitalia was placed into special bankruptcy proceedings under Italian law.

The EU started an investigation in April 2018 to establish whether the two loans were in line with EU state aid rules. This followed a number of formal complaints received by the European Commission in 2017 from rival airlines, alleging that Italy had granted unlawful and incompatible state aid to Alitalia. In January 2018, Italy notified the state loans as rescue aid under the Commission's guidelines on rescue and restructuring aid.

However, Vestager said the loans could not be considered rescue aid under the rules for companies in difficulty because they were not paid back within six months and because no restructuring plan had been agreed to get the airline back into the black.

The European Commission also said on Friday that the country's new national flag carrier ITA would not be considered the economic successor of Alitalia and that capital injections totaling 1.35 billion euros into the new venture are in line with market conditions and are not considered to be illegal state aid.

The European Commission last May gave Italy permission to give 12.8 million euros in state aid to the floundering Alitalia airline to help it absorb the losses caused by the coronavirus pandemic.