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The European Commission has extended the scope of an in-depth investigation opened in February 2013 into public support measures in favour of Estonian Air to include the decision by Estonia on 28 February 2013 to increase a previous rescue loan by €28.7 million, EC reported.
The Commission will now investigate whether the measure is in line with EU state aid rules. The extension of the investigation will give interested third parties an opportunity to comment on this additional measure. It does not prejudge the outcome of the investigation.
Since 2009, Estonian Air has benefitted from several public interventions, including three capital injections totalling over €57 million. In 2012, Estonia notified its intention to grant a €8.3 million rescue loan to Estonian Air. The Commission opened an in-depth investigation because it had doubts whether these public interventions were in line with EU state aid rules for the airline industry and for rescuing and restructuring companies in financial difficulty. These rules foresee, in particular, that a company can receive rescue aid only once in ten years, to avoid that ailing companies are kept artificially alive with taxpayers' money. In certain circumstances, the R&R guidelines also allow rescue aid for urgent structural measures that are necessary to ensure the survival of a company in difficulty.
On 28 February 2013, Estonia decided to increase the rescue loan by €28.7 million, of which €16.6 million have already been paid to Estonian Air. Estonia considers that the original €8.3 million loan was set to keep Estonian Air running through 31 March 2013 and that the airline needs additional resources to survive thereafter. The Estonian authorities contend that most of the additional loan, i.e. €23.8 million out of €28.7 million, is needed to finance urgent structural measures that should enable Estonian Air to implement certain aspects of the proposed restructuring, to downsize the business and minimise losses immediately.
The Commission will now investigate whether the €28.7 million increase of the rescue loan fulfils the requirements of the R&R guidelines, notably whether it respects the "one-time/last-time principle" and whether the additional financing is necessary to implement genuine urgent structural measures.
Estonian Air is the flag carrier airline of Estonia. Since 2011/2012, the stake of the State in the airline is reached 97.34%. Estonian Air has registered significant losses since 2006.
Public interventions in companies that carry out economic activities can be considered free of state aid in the meaning of the EU rules when they are made on terms that a private player operating under market conditions would have accepted. If the MEIP is not respected, the public intervention constitutes state aid in the meaning of Article 107 of the Treaty on the Functioning of the European Union (TFEU), because it procured an economic advantage to the beneficiary that its competitors did not have. The Commission will then assess whether such aid can be found compatible with common EU rules that allow certain categories of aid.