State aid: Commission opens in-depth inquiry into state measures in favour of Latvian airline airBal

The European Commission has opened an in-depth investigation to verify whether various public support measures provided by Latvia in favour of the majority State-owned airline airBaltic are in line with EU state aid rules. At this stage, the Commission has doubts that these measures were carried out on terms that a private player operating under market conditions would have accepted. The opening of an in-depth investigation gives interested third parties an opportunity to comment on the measures under assessment. It does not prejudge the outcome of the investigation.

Latvian airline airBaltic has experienced financial difficulties since 2008, which resulted in significant losses and negative equity in 2010 and 2011, and received several public support measures. The Commission started to look at them on its own initiative and received two complaints. The in-depth investigation will focus on the following measures:

• a LVL 16 million loan (approx. €22.65 million) granted by Latvia in October 2011, the interest rate of which was substantially reduced by Latvia in December 2011,

• the first tranche of LVL 41.6 million (approx. €58.89 million) of a second loan granted by Latvia in December 2011,

• a capital increase agreed in December 2011 by Latvia and BAS, a former private majority shareholder of airBaltic, through loan conversion and a cash contribution from BAS,

• the acquisition by Latvia and BAS of 0%-coupon bonds issued by airBaltic in 2010,

• several transfers and payments made in behalf and/or to the benefit of airBaltic by a nationalised bank, and

• a transfer to airBaltic of a claim held by Latvia in exchange of just LVL 1.

The Commission will now investigate whether these measures constitute state aid in the meaning of EU rules, i.e. if they procured an economic advantage to airBaltic over its competitors in the EU Single Market. In the affirmative, the Commission will investigate whether these state aid measures can be found compatible with EU state aid rules that allow certain categories of aid.