Brussels backs further €40mn state aid to prop up Alitalia

The European Commission has concluded that EUR39.7 million euros (USD47.1 million) in further assistance the Italian government had asked to provide to Alitalia (AZ, Rome Fiumicino) complied with Brussels’ more flexible Covid-era rules on state aid.

The measure compensates the long-suffering and loss-making flag carrier for losses sustained on certain routes due to the impact of the pandemic on travel restrictions and air travel demand between March 1 and April 30.

It follows the commission’s approval on May 12 of EUR12.84 million (USD15.2 million) in aid to compensate the bankrupt airline for losses during January. But the latest nod is the fifth authorisation for subsidies to Alitalia that Brussels has approved since the start of the pandemic, taking the total so far to around EUR350 million (USD415 million).

In addition, to cover for losses since May 1, Rome has been considering another bridge loan for the company to continue to operate while its state-owned successor ITA – Italia Trasporto Aereo (AZ, Rome Fiumicino) presses ahead with preparations for take-off, which may now not happen until October, government sources told local media.

“The restrictions put in place in Italy and other countries to limit the spread of a second and third wave of the coronavirus pandemic have heavily affected Alitalia’s operations. As a result, Alitalia incurred significant operating losses until at least April 30, 2021,” the European Commission explained in a statement on July 2.

European Union rules allow member states to compensate specific companies or sectors for damages directly caused by exceptional occurrences, and “the commission considers that the coronavirus outbreak qualifies as such an exceptional occurrence, as it is an extraordinary, unforeseeable event having significant economic impact,” it added. “As a result, exceptional interventions by the member state to compensate for the damages linked to the outbreak are justified.”

The sum was calculated as a loss of profitability on “certain routes”, the commission said without elaborating, and the measure was found to be “proportionate, as the route-by-route quantitative analysis submitted by Italy appropriately identifies the damage attributable to the containment measures.”

However, Brussels is still investigating two pre-Covid support measures that Rome granted to Alitalia, loans of EUR900 million (USD1.1 billion) in 2017 and EUR400 million (USD480 million) in 2019.

On July 1, the day before the statement was issued, the European Commission said it had agreed with Italy on the parameters for separating Alitalia from its successor, local media reported, signalling that the lengthy talks between Brussels and Rome on Alitalia’s fate are drawing to a conclusion.