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State aid: Commission extends inquiry into public support measures for Estonian Air

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16-Apr-2013 The European Commission has extended the scope of an in-depth investigation opened in February 2013 into public support measures in favour of Estonian Air (see IP/13/133) to include the decision by Estonia on 28 February 2013 to increase a previous rescue loan by €28.7 million. The Commission will now investigate whether the measure is in line with EU state aid rules. The extension of the investigation will give interested third parties an opportunity to comment on this additional measure. It does not prejudge the outcome of the investigation.

Since 2009, Estonian Air has benefitted from several public interventions, including three capital injections totalling over €57 million. In 2012, Estonia notified its intention to grant a €8.3 million rescue loan to Estonian Air. The Commission opened an in-depth investigation (see IP/13/133) because it had doubts whether these public interventions were in line with EU state aid rules for the airline industry and for rescuing and restructuring companies in financial difficulty (R&R guidelines, see MEMO/04/172). These rules foresee, in particular, that a company can receive rescue aid only once in ten years, to avoid that ailing companies are kept artificially alive with taxpayers' money (the so-called "one-time/last-time principle"). In certain circumstances, the R&R guidelines also allow rescue aid for urgent structural measures that are necessary to ensure the survival of a company in difficulty.

On 28 February 2013, Estonia decided to increase the rescue loan by €28.7 million, of which €16.6 million have already been paid to Estonian Air. Estonia considers that the original €8.3 million loan was set to keep Estonian Air running through 31 March 2013 and that the airline needs additional resources to survive thereafter. The Estonian authorities contend that most of the additional loan, i.e. €23.8 million out of €28.7 million, is needed to finance urgent structural measures that should enable Estonian Air to implement certain aspects of the proposed restructuring, to downsize the business and minimise losses immediately.

The Commission will now investigate whether the €28.7 million increase of the rescue loan fulfils the requirements of the R&R guidelines, notably whether it respects the "one-time/last-time principle" and whether the additional financing is necessary to implement genuine urgent structural measures.