European Commission approves €106.7 million restructuring aid and €30.2 compensation for damages suffered by Corsair due to coronavirus outbreak

The European Commission has approved, under EU State aid rules, two French measures in favour of Corsair, an airline active in passenger and cargo transport mainly to French overseas territories.

The first measure consists in €106.7 million of restructuring aid for the company. The second measure, with a budget of €30.2 million, aims to compensate the company for damage suffered due to emergency measures put in place by governments in the context of the coronavirus outbreak.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Corsair was in financial difficulties, which were aggravated by the coronavirus outbreak. Today’s decisions enable France to support the airline with two independent measures. The restructuring aid will allow Corsair to partially finance the restructuring plan that should bring the company back to viability and will help avoiding disruptions for passengers in the outermost territories of the European Union. The second measure will compensate Corsair for the damage suffered because of the coronavirus outbreak that hit the aviation sector particularly hard.”

The French support measures

Corsair is a private French airline company, which operates routes from Paris-Orly airport to the French Antilles, Reunion, Mauritius, Côte d’Ivoire, USA and Canada. Due to important losses in the last two years, Corsair has been facing financial difficulties already before the coronavirus outbreak. Its financial difficulties have been severely aggravated by the travel restrictions imposed by France and by several destination countries to limit the spread of the coronavirus.

In November 2020, France notified to the Commission (i) a restructuring aid measure and (ii) a measure compensating damage suffered because of the coronavirus outbreak, both in favour of the airline.

The restructuring aid measure

The restructuring aid amounts to €106.7 million and is composed of (i) €21.9 million of tax deferrals, (ii) €4.8 million of tax credit, (iii) €18 million of soft loan and (iv) €62 million of participating loan.

The Commission assessed this measure under the Commission’s 2014 Guidelines on State aid for rescue and restructuring, which enable Member States to support companies in difficulty, provided, in particular, that the public support measures are limited in time and scope and contribute to an objective of common interest.

In the present case, the Commission has taken the following elements into account:

• The amount of the restructuring aid represents less than 50% of the restructuring costs. The rest of the restructuring costs will be covered by own contribution coming from a current shareholder (TUI), future shareholders (a consortium of investors active mainly in tourism sector) and other free resources (including the sale of three aircrafts). In the context of the restructuring, the current shareholders (Diamondale and TUI) will exit the company..
• The restructuring aid is accompanied by a restructuring plan aimed at restoring the viability of Corsair by 2023. The plan provides for reduction of staff costs, concentration of Corsair’s activities on its core profitable routes to French overseas regions, optimisation of the fleet and abandonment of loss making routes.
• Corsair also committed to a number of competition measures mitigating the negative effects of the planned aid (taking into account the small size of the company). In particular, for the duration of the restructuring plan, Corsair committed to: (i) not acquire interest or holdings in other companies; (ii) not increase its capacity over the fleet in operation or already ordered; (iii) not open new routes, except those identified in the plan; (iv) divest slots; (v) close its route Paris-Miami; and (vi) divest its customer service activities at Orly airport.
• Corsair did not benefit from rescue or restructuring aid in the past ten years.

The Commission found that the measure will help ensure the orderly continuation of flight services, in the interest of air passengers, and will contribute to maintain connectivity with French overseas territories, without unduly distorting competition in the Single Market.

Taking into account the elements above, the Commission therefore concluded that the planned restructuring aid is compatible with EU State aid rules.

The measure compensating damages suffered in context of coronavirus outbreak

Along with the restructuring aid, France notified to the Commission an aid measure to compensate Corsair for the damage suffered from 17 March to 30 June 2020 resulting from the containment measures and travel restrictions introduced by France and other destination countries to limit the spread of the coronavirus. The support will take the form of a €30.2 million tax credit.

In order to ensure that there will be no overcompensation, an independent external audit firm will verify that the aid does not exceed the amount of damage suffered. Any public support received by Corsair in excess of this amount will have to be returned. The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors for damage directly caused by exceptional occurrences, such as the coronavirus outbreak.

The Commission considers that the coronavirus outbreak qualifies as such an exceptional occurrence, as it is an extraordinary, unforeseeable event having significant economic impact. As a result, exceptional interventions by the Member State to compensate for the damage linked to the travel restrictions in the context of the outbreak are justified.

The Commission found that the French measure will compensate damage that is directly linked to the travel restrictions in the context of coronavirus outbreak. It also found that the measure is proportionate, as the compensation does not exceed what is necessary to make good the damage.

On this basis, the Commission concluded that the French damage compensation measure is in line with EU State aid rules.

Background

Member States can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities.

In this respect, for example:

• State aid rules based on Article 107(3)(c) TFEU, such as the Commission’s Guidelines on rescue and restructuring aid enable Member States to support companies (including those in difficulty before 31 December 2019) facing acute liquidity shortages and financial difficulties linked to or aggravated by the coronavirus outbreak and needing urgent rescue aid.
• Member States can also compensate specific companies or specific sectors for the damage suffered due and directly caused by exceptional occurrences, such as those caused by restrictive measures in the context of the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
• This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all Member States and the UK due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State aid Temporary Framework based on Article 107(3)(b) TFEU to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

The non-confidential version of the decisions will be made available under the case numbers SA.58463 (restructuring aid) and SA.58125 (damage compensation) in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.