The European Commission has found an Austrian €150 million subordinated loan (convertible into a grant) in favour of Austrian Airlines AG to be in line with EU State aid rules. The measure aims at partly compensating the airline for the damages suffered due to the coronavirus outbreak.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The €150 million public support measure will enable Austria to partly compensate Austrian Airlines for the damage it directly suffered due to the travel restrictions implemented to limit the spread of the coronavirus. The aviation sector has been hit particularly hard by the coronavirus outbreak. We continue working with Member States to discuss possibilities and find workable solutions to preserve this important part of the economy in line with EU rules.”
Austrian Airlines, which is part of the Lufthansa Group, is a major network airline operating in Austria. With a fleet of over 82 planes, Austrian Airlines served 130 destinations all over the world in 2019, carrying about 14.7 million passengers from its main hub, Vienna, and other airports to various international destinations. Since the start of the coronavirus outbreak, Austrian Airlines has suffered a significant reduction in its services, resulting in high operating losses.
Austria notified to the Commission an aid measure to partly compensate Austrian Airlines for the damage suffered from 9 March 2020 to 14 June 2020 resulting from the containment measures and travel restrictions introduced by Austria and other destination countries to limit the spread of the coronavirus.
The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or sectors for damage directly caused by exceptional occurrences.
The Commission considers that the coronavirus outbreak qualifies as such an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the Member State to compensate for the damages linked to the outbreak are justified.
The support will take the form of a €150 million subordinated loan, which is lower than the estimated damage directly caused to the airline in the period from 9 March 2020 to 14 June 2020 due to the travel restrictions implemented to limit the spread of the coronavirus. It will be converted into a grant only after (and to the extent that) Austrian Airlines’ financial statements for the financial year 2020, audited by an independent external audit firm, confirm that the aid does not exceed the amount of damage suffered during the grounding period. Following the audit, any public support received by Austrian Airlines in excess of the actual damage suffered will have to be returned to Austria. The risk of overcompensation is therefore excluded.
For the purposes of assessing the proportionality of the measure under Article 107(2)(b) TFEU, the Commission also took into account other measures in favour of Austrian Airlines under the Temporary Framework and Article 107(3)(b) TFEU:
i. a contribution of €150 million in equity by its indirect shareholder Deutsche Lufthansa AG (which may be drawn from the €6 billion German recapitalisation of Deutsche Lufthansa AG approved by the Commission on 25 June 2020), and
ii. a €300 million loan by a consortium of commercial banks (subject to a State guarantee that will be granted under an aid scheme already approved by the Commission on 17 April 2020 under the Temporary Framework, as amended by decision of 9 June 2020).
These measures are separate from the measure approved today and aim at ensuring that Austrian Airlines has sufficient liquidity to continue its activities during and after the current crisis by restoring the capital structure of Austrian Airlines and ensure its viability. They are neither intended as compensation for nor covering damage (losses) suffered by Austrian Airlines as a direct result of the travel restrictions and containment measures taken by Austria and other travel destination countries as a consequence of the coronavirus outbreak.
Therefore, the present measure only compensates damages that are not otherwise covered by other support.
On this basis, the Commission concluded that the Austrian damage compensation measure is in line with EU State aid rules.