EC says Italy must recover €400m plus interest in Alitalia aid probe

The European Commission (EC) deemed that the Italian state’s €400 million ($431.1 million) loan to Alitalia in 2019 was illegal, stating that the country must recover the funds it gave to the now-bankrupt airline.

“Today the Commission has concluded that, when granting the €400 million [$431.1 million) State aid loan in 2019, Italy did not act like as a private operator would have done, as it did not assess in advance the probability of repayment of the loans, plus interest, but aimed at ensuring the uninterrupted service of Alitalia’s domestic and international flights,” read the EC’s announcement on March 27, 2023. Furthermore, the Commission highlighted that the aid given “could not be approved as rescue aid under the Guidelines on Rescue and Restructuring aid” because Alitalia had already received two loans in 2017.

“Therefore, the new loan would be in breach of the one-time-last-time requirement under the Rescue and Restructuring Guidelines,” the EC noted. As such, “no private investor would have granted the loan to the company at the time and that the loan gave Alitalia an unfair economic advantage vis-à-vis its competitors on national, European and world routes, which amounted to incompatible State aid”.

As a result, the EC concluded that “Italy must now recover the illegal State aid amounting to €400 million ($431.1 million) plus interest from Alitalia”.

Alitalia declared bankruptcy in October 2021, with ITA Airways immediately succeeding the airline on the same day on October 15, 2021. However, the Commission previously ruled that ITA Airways “is not the economic successor of Alitalia,” which is why the new flag carrier of Italy will not be liable to repay the Italian state the €400 million ($431.1 million) plus interest.

The Italian state is looking to fully or partly privatize ITA Airways. The local government had already invested €1.1 billion ($1.1 billion) into the carrier by November 2022. Italy’s deal with the EC included a provision that the former could provide the newly established airline with up to €1.3 billion ($1.4 billion) of state aid.

Several parties were interested in acquiring the airline’s full share capital or a stake in the airline, including Lufthansa. The German airline group officially submitted a bid for a minority stake in ITA Airways on January 18, 2023.