The European Commission announced on Wednesday that it 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, informs LETA.
"At this stage, the Commission has doubts whether these measures are in line with EU state aid rules," the Commission said in a press release. 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 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).
Bloomberg reports on Wednesday that EU rules restrict amounts of aid nations can give to prop up carriers weighed down by the bloc’s sovereign debt crisis and high oil prices.
The Commission said that Estonian Air has already benefited from three capital injections of €7.3 million (in 2009), €19.9 million (in 2010) and €30 million (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.
As Bloomberg writes, Estonia considers that its support for the airline is in line with EU state aid rules, Ahti Kuningas, the deputy secretary general at the Economy Ministry, said in an e-mailed statement.
"The government has thoroughly considered capital injections after acquiring the majority stake in Estonian Air. The owner’s activities have been underpinned by the understanding that on one hand, the Estonian state needs flight connections, and on the other hand, that the company can be restructured into a sustainable and profitable air carrier, Kuningas told to Bloomberg.
Estonian Air is the flag carrier airline of Estonia, based in Tallinn Airport. While initially it was owned at 66% by private investors, in 2010 the State increased its stake to 90% and in 2012 it reached 97.34%.
The Commission has recently opened other investigations into public support measures granted to national flag carriers, namely airBaltic and Adria Airways. The Commission also recently adopted decisions concerning Air Malta, Czech Airlines and LOT.