Rome should be told $ 900m loan to Alitalia violated EU state aid rules

Updates on EU state aid

The Italian government broke EU state aid rules by granting 900 million euros in bailout loans to Alitalia in 2017, according to a verdict to be announced by Brussels.

The decision by EU competition authorities, which two people with direct knowledge of the matter say will be made public on Thursday, comes after a three-year investigation into whether the bridging loans to Alitalia have illegally distorted the competition in the block.

EU law prohibits a Member State from giving a business financial support that gives it an advantage over its competitors. The current Italian government, which was not in power when the loans were made, declined to comment.

This decision marks the last ignominious chapter for Alitalia, the Italian airline company which has been in deficit for 75 years. The government in Rome has already worked with Margrethe Vestager, the EU’s competition officer, on an agreement allowing the creation of a new independent airline from Alitalia.

Brussels will confirm details of the new airline, known as Italia Transporto Aereo (ITA), which will start flying next month on Thursday.

The ITA will be economically independent and will not be responsible for illegal state aid received by Alitalia in recent years, people directly familiar with the projects said.

The new carrier will be able to buy part of Alitalia’s fleet and a reduced number of landing slots as part of the agreement between Italy and Brussels to allow the new company to operate, the people added. . ITA may also bid for the right to trade under the Alitalia name.

Alitalia has faced financial difficulties for decades and has not recorded an annual net profit since the turn of the millennium. Rome took full control of the airline during the Covid-19 pandemic, when aviation was hit by strict travel restrictions to control the spread of the virus.

Other European governments have also invested funds in national carriers during the pandemic. Michael O’Leary, managing director of Ryanair, compared German Lufthansa to a “crack addict”.

Brussels has yet to rule on a separate € 400 million government loan to Alitalia to help it streamline operations as it attempted to sell assets in 2019. Opening this investigation last year, the committee raised “serious doubts” about the aid’s compliance. with state aid rules.

This year Mario Draghi, the Italian Prime Minister, joked that he considered Alitalia “a family affair, a bit expensive”, referring to his emotional connection with the Italians as well as his significant losses.

Draghi’s new unity government has embarked on a very ambitious program of national reform to revive Italy’s stagnant domestic economy, including sweeping changes in the country’s legal system and bureaucracy.

The new version of the airline, he said, was to “be supported by its own wings, without subsidies.”

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