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Saturday, January 28, 2023

Alitalia Must Repay $1.1B

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The European Commission concluded on September 10, 2021, that Alitalia must repay state aid, but capital injections made to successor Italia Trasporto Aereo (ITA) are in line with market conditions.

Alitalia will stop operations on October 15, 2021, and the baton will be passed to ITA.

According to the Commission, two loans totaling €900 million ($1.1 billion) handed by Italy to struggling flag carrier Alitalia in 2017 are illegal under state assistance regulations.

In the judgment, Commissioner Margrethe Vestager stated, “Italy must now collect this amount from Alitalia.”

Notably, when awarding the loans in 2017, Italy did not behave like a private investor by considering the chances of repayment.

“Our evaluation of Alitalia’s financial status in early 2017 indicated that repayment was very doubtful – and, in fact, the loans have not been repaid to this day,” Vestager explained.

The loans also did not comply with state aid requirements for troubled enterprises because they were not repaid within six months and there was no restructuring scheme in place.

According to the Commission, it received a number of complaints from airlines alleging that the loans constituted unfair aid.

In 2019, Italy granted Alitalia another €400 million loan, provoking additional objections from other carriers. Vestager stated that a probe into the loan was underway and that a final decision will be made soon.

However, the commission decided that ITA is not Alitalia’s “economic successor” and hence is not obligated to reimburse the illicit state aid obtained by Alitalia.

According to Vestager, under EU laws, a new firm is not accountable for prior help if the two enterprises are sufficiently different from one another, a condition known as “economic discontinuity.”

This condition is met by ITA because it will operate less than half of Alitalia’s aircraft, travel to fewer destinations, and use a limited number of Alitalia’s slots.

Furthermore, ITA will not take over Alitalia’s non-aviation activities, like ground handling and maintenance, nor will it take over Alitalia’s loyalty program. According to the Commission, it also has a more sustainable cost structure.

Vestager also stated that the Italian government’s €1.35 billion investment in ITA does not constitute state aid.

“The business plan anticipates that ITA will be a viable airline with sustainable costs and staffing, flying to a limited number of locations with an emphasis on profitable routes,” she said.

“Today represents a new beginning for Italy’s air transport, which has faced numerous challenges,” Vestager added. “Once ITA takes off, it is up to Italy and the ITA management to seize this chance once and for all.

To develop a viable airline that runs on an equal basis with its competitors lives according to sustainability goals, and will be successful for a long time.”

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  1. So, the conclusion on the ‘investigation’ comes 4 years later at a time that Alitalia is almost closing down, they know in Brussels that from a bare chicken you cannot pluck any feathers. They know this new ITA is not going to repay the money and…. the north european tax payers is bedazzeled again, by Italy, Alitalia AND Brussels. Everything is possible and allowed south of Paris. Ridiculous !!


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