Through a statement, the Executive of the European Commission (EC) informed that the introduction of 133 million Euros has been approved with the aim of providing public support to the airline SATA by the Portuguese Government.
During the last months of this year, it has been possible to observe that the European Commission has taken the decision to approve various rescues of the air sector, there have been approximately ten announced during the first five months of the pandemic, this is due to the fact that this industry has suffered great losses as could be seen in the Statistics of the International Council of Airports (ACI) on the impact of the Covid-19 on the sector.
Most of these rescues provided by the EC have taken the form of guarantees and loans to the airlines, for which they will have to return the money in the future. However, this initiative has had some exceptions, such as with Lufthansa or Alitalia airlines, because the States have given capital in exchange for shares.
SATA
The decisions taken by the different governments in order to overcome the Covid-19 have left large losses to the airlines as we saw in our previous article entitled Measures by Covid-19 can lead to bankruptcy for several airlines, that is why in recent months SATA’s financial problems have increased; according to their reports since 2014 they have suffered significant operating losses to the point of reporting negative equity in recent years.
The government of Portugal communicated to the EC its objective to grant urgent support to SATA, thus, being able to give the company sufficient resources to meet its immediate liquidity debts. The Portuguese authorities assessed that they will cover the liquidity needs in relation to the public service obligations of the airline for the next six months and therefore have evaluated that the essential services are at approximately 133 million Euros.
On the other hand, the EC found that the aid that has been decided to provide to the company in the form of a public guarantee of about EUR 133 million on a temporary loan relates only to urgent liquidity needs where public service routes and services at local airports are included.
Research
On the other hand, the European Commission informed that they have decided to initiate an investigation to assess whether some of the public support measures in favor of SATA are in line with the guidelines given in 2014 on State aid for rescue and restructuring; because since 2017 the Autonomous Region of the Azores, which is the owner of SATA, accepted three capital increases to partially cover the capital deficits that the company had, they have commented that most of the amounts have been paid.
Based on the above, the Portuguese authorities have indicated that the capital increases given to SATA are not considered as State aid because the Regional Government of the Azores intervened as a private investor operating under market conditions; however, the EC informed that it will further investigate whether these increases constituted State aid that should have been notified.
EC and state aid to airlines
The European Commission has also announced that state aid has been approved with a series of multi-million dollar packages for Greece, Poland and Portugal with the aim of supporting and softening the negative impact on the economy that has been caused by the Covid-19, most of which will be in the form of grants and loan guarantees.
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