State aid: Commission orders Estonia to recover incompatible aid from national air carrier Estonian

Estonian Air therefore needs to pay back the state aid already received, which according to the Commission's information amounts to about €85 million plus interest, and cannot receive an additional €40 million of restructuring aid. Estonian Air has been consistently loss-making since 2006. The Commission's investigation has shown that the aid measures cannot be approved under EU state aid rules, because they involve repeated public support that did not enable the company to become viable again and did not limit the distortions of competition created by the aid.

Commissioner Margrethe Vestager, in charge of competition policy, said: "Companies should compete based on a sustainable business model rather than relying on continued support by the State to stay in the market. Estonian Air has repeatedly received public subsidies over the past five years but did not carry out the necessary restructuring to become viable as a business. It would not be a good use of taxpayer money to keep Estonian Air in the market artificially - nor would it be fair to competitors, which have to compete without such support."

Estonian Air has been in financial difficulties for many years. It has repeatedly benefitted from public support measures during that period. Some of these measures did not involve state aid but a large majority of them provided Estonian Air with an unfair selective advantage over its competitors that cannot be justified under EU state aid rules.

The Commission's investigation found that a €2.48 million State participation in a capital increase in Estonian Air and the sale of Estonian Air's ground-handling activities to the State-owned Tallinn Airport for €2.4 million, both in 2009, were conducted in line with market conditions. Therefore, they did not involve state aid within the meaning of the EU rules.

On the other hand, several subsequent measures provided Estonian Air with a selective advantage over its competitors and therefore involved state aid in favour of Estonian Air amounting to a total of €125.6 million (out of which €84.9 million have already been paid out). In particular, these concern:

• A State capital injection of €17.9 million in November 2010;
• An additional State capital injection of €30 million in two tranches (December 2011 and March 2012);
• A rescue loan facility of €37 million provided by the State in several tranches between December 2012 and November 2014; and
• A planned additional State capital increase of €40.7 million.

State aid for companies in difficulty can only be approved if the measures comply with conditions set out in the applicable Commission Rescue and Restructuring Aid Guidelines.

Under the Guidelines rescue and restructuring aid can only be granted once in a ten-year period (the so-called "one time, last time" principle). This is to avoid that a company relies on public money instead of competition on the merits. However, Estonia granted at least three public subsidy measures to Estonian Air between 2010 and 2014 with another capital injection still foreseen.

The Commission's investigation also revealed that Estonian Air did not have a credible restructuring plan capable of ensuring that the company would become viable without continued state support. Finally, the plan did not include sufficient measures aimed at limiting the distortions of competition created by the State support.

The repeated public support measures have already given the airline a considerable economic advantage that its competitors did not have. In order to remedy this distortion of competition, Estonian Air now needs to pay back the aid already received (€84.9 million plus interest) to Estonian taxpayers. This is necessary to ensure a level-playing field in the internal market.