Aviation and State Aid – November 2012
News    ·   28-11-2012
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AUTHOR: Ron Galea Cavallazzi

There has been some interesting activity in the aviation and State aid sector in November as reported by the European Commission:

Sale of LOT Polish Airlines’ Subsidiaries

The European Commission concluded that the sale of LOT Services (which provides ground handling services), LOT Catering and LOT Airport Maintenance Services, which are all subsidiaries of LOT Polish Airlines, was carried out on market terms and did therefore not involve State aid.

LOT has been under restructuring since 2009 and is trying to improve its financial situation by selling subsidiaries and focusing on the core activity of passengers and cargo transport.

Since the subsidiaries were not purchased through a tender procedure and were purchased by State-owned entities, the Commission had to make sure that the terms of the transfers (mainly the price and pre-transaction valuations) did not contain hidden subsidies in favour of LOT.

The Commission concluded that the sales were carried out under terms that a private player operating under market conditions would have accepted (the market economy investor principle) and therefore did not involve any state aid.

State Measures in Favour of Latvian Airline airBaltic

The European Commission has opened an in-depth investigation to verify whether certain public support measures provided by Latvia in favour of airline airBaltic are in line with EU state aid rules.

The in-depth investigation is expected to focus, among others, on a loan granted by Latvia, the interest rate of which was substantially reduced soon after, a capital increase through loan conversion and a cash contribution, the acquisition of coupon bonds and several transfers and payments made on behalf and/or to the benefit of airBaltic by a nationalised bank.

The Commission will first investigate whether the measures under review constitute state aid and, if they do, it will further investigate to determine whether these state aid measures can be found compatible with EU state aid rules.

State Measures in Favour of Slovenian Airline Adria Airways

The European Commission has opened an in-depth investigation to verify whether certain public support measures provided by Latvia in favour of airline Adria Airways are in line with EU state aid rules.

These measures under investigation include four capital injections between 2007 and 2011, and the Commission has to determine whether they were granted on market terms. If the measures have procured an economic advantage to Adria Airways over its competitors in the EU Single Market the Commission will investigate whether they can be found compatible with EU state aid rules.

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