European Union finds Alitalia loans ‘illegal’, clears new carrier

BRUSSELS (AFP) – The European Union’s (EU) antitrust authorities ruled yesterday that Italy’s EUR900 million loans to long-struggling airline Alitalia were “illegal”, but cleared the country’s new carrier to get state funding and avoid paying back the money.

“Following our in-depth investigation, we reached the conclusion that two public loans worth EUR900 million granted by Italy to Alitalia gave the company an unfair advantage over its competitors, in breach of EU State aid rules,” EU Competition Chief Margrethe Vestager said in a statement.

“They must now be recovered by Italy from Alitalia to help restore a level playing field in the European aviation industry.”

But the authorities in Brussels simultaneously said new flag airline ITA – set to start flying next month – was not liable to reimburse the money and that EUR1.35 billion being injected into the firm by Rome did not breach state aid rules.

“Italy has demonstrated that there is a clear break between Alitalia and the new airline ITA, and that its investment in ITA is in line with terms that a private investor would have accepted,” Vestager said.

A Boeing 777 bearing the Alitalia livery at Rome’s Fiumicino international airport. PHOTO: AFP

“Once ITA takes off, it is for Italy and ITA’s management to make use of this opportunity once and for all. And we will continue to do our part to ensure fair competition in the European aviation sector.”

Loss-making Alitalia was placed under state administration in 2017 but Italy has struggled to find an investor to take it over. The situation was only exacerbated by the coronavirus pandemic that grounded airlines worldwide.

The Italian government gave the company two loans for the amount of EUR600 million and EUR300 million in 2017, as Alitalia scrambled for liquidity without access to the debt market.

Earlier this year Italy said it had reached an agreement with the EU for a bailout that creates a new debt-free company to take over some of Alitalia’s assets – ITA.

The board of directors of ITA last month approved a binding offer for 52 of Alitalia’s aircraft, related airport slots and other assets.

The Italian government has created a EUR100-million fund to reimburse Alitalia customers.

Italy provided state loans to Alitalia totalling EUR1.3 billion between 2017 and 2019.

In July, it approved another EUR700 million for ITA.

Further sums are expected in 2022 and 2023, bringing the total to EUR1.35 billion.