21-Nov-2012 1:49 PM

European Commission opens in-depth inquiry into state measures in favour of airBaltic

European Commission (EC) opened (20-Nov-2012) 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 EC "has doubts that these measures were carried out on terms that a private player operating under market conditions would have accepted". The EC noted "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 EC started to look at them on its own initiative and received two complaints. The in-depth investigation will focus on the following measures:

  • A LVL16 million (EUR22.65 million) loan granted by Latvia in Oct-2011, the interest rate of which was substantially reduced by Latvia in December 2011,
  • The first tranche of LVL41.6 million (EUR58.89 million) of a second loan granted by Latvia in Dec-2011;
  • A capital increase agreed in Dec-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;
  • A transfer to airBaltic of a claim held by Latvia in exchange of LVL1.

The EC will now investigate whether these measures constitute state aid in the meaning of EU rules. [more - original PR]

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