State aid probe could hinder Italy's efforts to find buyer for Alitalia

Source: Xinhua    2018-04-27 22:39:34

by Eric J. Lyman

ROME, April 27 (Xinhua) -- Struggles to find a buyer for beleaguered flagship air carrier Alitalia may suffer from a new road block after the European Commission this week announced it was looking into whether or not Italian government loans to the carrier constituted illegal state aid.

Alitalia, which has finished in the red every fiscal year since 1998, received a 900 million euro (1.1 billion U.S. dollars) "bridge loan" last year to help underwrite a restructuring effort to make the company more attractive to potential buyers after a major shareholder pulled out.

Now, the European Commission is looking into whether those loans might have been illegal.

"The commission's duty is to make sure loans member states give to companies are in line with European Union rules on state aid," Margrethe Vestager, commissioner for competition, said in a statement. State aid rules are designed to guarantee that government support does not give a European company an unfair advantage compared to its rival.

Vestager said her office has received multiple complaints that Italian government loans to Alitalia might have run afoul of EU rules, which allow short-term emergency measures.

On Thursday, Italy's cabinet met to extend time allowed for Alitalia to repay the bridge loan.

"At a certain point extending the repayment time for a loan like this makes it less of a bridge loan and more of a superhighway," Andrea Giuricin, a management professor at the University of Milan-Biocca and a fellow with the Bruno Leoni think tank, told Xinhua.

Giuricin and others said the commission's investigation into the loan could make Alitalia an even less attractive target for a potential buyer since any new owner could end up being liable for any sanctions or penalties that come along with a ruling of illegal state aid.

"I would think that any potential buyer would have to consider the implications of this investigation," Francesco Rossi dal Pozzo, a European law professor at the University of Milano, said in an interview.

German air carrier Lufthansa is the most visible potential buyer for Alitalia, but Ulrik Svensson, Lufthansa's chief financial officer, said this week the company has "absolutely no interest" in Alitalia until it is restructured. Earlier in April, Lufthansa said it had submitted a plan for Alitalia's restructuring. The company did not say whether the commission's investigation into the Italian carrier would dampen its interest in a takeover.

Lufthansa has some experience taking over troubled rivals kept afloat with government help: The European Commission gave its OK to a Lufthansa takeover of Air Berlin last year, after the smaller company benefitted from a 150-million-euro (185-million-U.S.-dollar) loan from the German government. But Giuricin said there were no charges that the loan constituted illegal state aid since it was paid back within two months.

In addition to Lufthansa, a consortium led by British discount carrier EasyJet and Hungarian carrier Wizzair have expressed interest in taking over Alitalia.

The last company to acquire a large share in Alitalia was Etihad Airways, based in the United Arab Emirates, which acquired a 49-percent stake in 2014. But Etihad pulled out after Alitalia rejected dramatic plans to reduce the size of the company, setting the table for last year's loan.

Alitalia has received at least 6 billion euros (7.3 billion U.S. dollars) in public and private outside funding since 1998.

Editor: yan
Related News
Xinhuanet

State aid probe could hinder Italy's efforts to find buyer for Alitalia

Source: Xinhua 2018-04-27 22:39:34

by Eric J. Lyman

ROME, April 27 (Xinhua) -- Struggles to find a buyer for beleaguered flagship air carrier Alitalia may suffer from a new road block after the European Commission this week announced it was looking into whether or not Italian government loans to the carrier constituted illegal state aid.

Alitalia, which has finished in the red every fiscal year since 1998, received a 900 million euro (1.1 billion U.S. dollars) "bridge loan" last year to help underwrite a restructuring effort to make the company more attractive to potential buyers after a major shareholder pulled out.

Now, the European Commission is looking into whether those loans might have been illegal.

"The commission's duty is to make sure loans member states give to companies are in line with European Union rules on state aid," Margrethe Vestager, commissioner for competition, said in a statement. State aid rules are designed to guarantee that government support does not give a European company an unfair advantage compared to its rival.

Vestager said her office has received multiple complaints that Italian government loans to Alitalia might have run afoul of EU rules, which allow short-term emergency measures.

On Thursday, Italy's cabinet met to extend time allowed for Alitalia to repay the bridge loan.

"At a certain point extending the repayment time for a loan like this makes it less of a bridge loan and more of a superhighway," Andrea Giuricin, a management professor at the University of Milan-Biocca and a fellow with the Bruno Leoni think tank, told Xinhua.

Giuricin and others said the commission's investigation into the loan could make Alitalia an even less attractive target for a potential buyer since any new owner could end up being liable for any sanctions or penalties that come along with a ruling of illegal state aid.

"I would think that any potential buyer would have to consider the implications of this investigation," Francesco Rossi dal Pozzo, a European law professor at the University of Milano, said in an interview.

German air carrier Lufthansa is the most visible potential buyer for Alitalia, but Ulrik Svensson, Lufthansa's chief financial officer, said this week the company has "absolutely no interest" in Alitalia until it is restructured. Earlier in April, Lufthansa said it had submitted a plan for Alitalia's restructuring. The company did not say whether the commission's investigation into the Italian carrier would dampen its interest in a takeover.

Lufthansa has some experience taking over troubled rivals kept afloat with government help: The European Commission gave its OK to a Lufthansa takeover of Air Berlin last year, after the smaller company benefitted from a 150-million-euro (185-million-U.S.-dollar) loan from the German government. But Giuricin said there were no charges that the loan constituted illegal state aid since it was paid back within two months.

In addition to Lufthansa, a consortium led by British discount carrier EasyJet and Hungarian carrier Wizzair have expressed interest in taking over Alitalia.

The last company to acquire a large share in Alitalia was Etihad Airways, based in the United Arab Emirates, which acquired a 49-percent stake in 2014. But Etihad pulled out after Alitalia rejected dramatic plans to reduce the size of the company, setting the table for last year's loan.

Alitalia has received at least 6 billion euros (7.3 billion U.S. dollars) in public and private outside funding since 1998.

[Editor: huaxia]
010020070750000000000000011105521371422311