State aid: Commission opens in-depth inquiry into €200 million restructuring aid for LOT Polish Airl

The European Commission has opened an in-depth investigation to assess whether a PLN 804 million (around €200 million) restructuring aid for the ailing state-owned carrier LOT complies with EU state aid rules. The Commission will examine in particular whether the planned aid will enable LOT to become viable without continued public funding and whether the company offers adequate compensation to alleviate the distortion of competition caused by the state support. The Commission will also verify if LOT sufficiently contributes to the cost of restructuring. The opening of an in-depth investigation gives interested third parties an opportunity to comment on the measures under scrutiny. It does not prejudge the final outcome of the investigation.

LOT has been in difficulty for several years. In May 2013, the Commission approved temporarily a €100 million rescue loan, upon the commitment of Poland to notify a restructuring plan capable of ensuring the long-term viability of the firm (see IP/13/431).

On 20 June 2013, Poland notified the Commission a €200 million capital increase to help the cash-starved LOT finance the restructuring. The underlying restructuring plan covers a two and a half year restructuring period and aims at restoring viability by 2015.

The Commission has doubts whether LOT's restructuring plan complies with the requirements of the 2004 EU Rescue and Restructuring Guidelines (see MEMO/04/172). In particular, the Commission is concerned that the forecasts on long-term viability may not be realistic and that the proposed capacity reduction may not be adequate to compensate for the distortions of competition. The Commission also has doubts whether LOT's own contribution to the restructuring cost is sufficient.

Finally, the Commission will investigate whether LOT is eligible for restructuring aid in view of potential aid the company may have previously received from the state-owned airports in Poland when it was already in difficulties. According to EU state aid rules, companies in difficulty can receive rescue and restructuring aid only once over a period of ten years. This is to avoid keeping ailing firms in business with continued public funding.