Rome set to be told $900m loan to Alitalia breached EU state-aid rules

EU state aid updates

Italy’s government breached EU state-aid rules when it gave €900m in rescue loans to Alitalia in 2017, according to a verdict set to be announced by Brussels.

The decision by EU competition authorities, which two people with direct knowledge of the matter said would be made public on Thursday, comes after a three-year investigation into whether bridge loans to Alitalia illegally distorted competition in the bloc.

EU law prohibits a member state from granting a company financial support that gives it an advantage over its rivals. The current Italian government, which was not in office when the loans were made, declined to comment.

The decision spells the latest ignominious chapter for Alitalia, Italy’s perennially lossmaking flag carrier for 75 years. The Rome government has already been working with Margrethe Vestager, the EU competition chief, on a deal to allow a new airline to be created that will be independent of Alitalia.

Brussels will confirm on Thursday the details of the new airline, known as Italia Transporto Aereo (ITA), which will start flying next month.

ITA will be economically independent and will not be liable for any illegal state aid received by Alitalia in recent years, people with direct knowledge of the plans said.

The new carrier will be able to buy part of Alitalia’s fleet and a reduced number of landing slots as part of the deal stuck between Italy and Brussels to allow the new company to operate, these people added. ITA will also be able to bid for the right to trade under the name Alitalia.

Alitalia has faced financial difficulties for decades and has not posted an annual net profit since the start of the millennium. Rome took full control of the airline during the Covid-19 pandemic, when aviation was hit by strict curbs on travel to control the spread of the virus. 

Other European governments also put funds into national carriers during the pandemic. Michael O’Leary, chief executive of Ryanair, compared Germany’s Lufthansa to a “crack cocaine junkie”.

Brussels is still to rule on a separate €400m government loan given to Alitalia to help it streamline its operations as it tried to sell assets in 2019. Opening that inquiry last year, the commission raised “serious doubts” about whether the aid was in line with state-aid rules.

This year Mario Draghi, Italy’s prime minister, joked that he considered Alitalia “a family thing, a little expensive”, referring to its emotional connection with Italians as well as its sizeable losses.

Draghi’s new unity government has embarked on a vastly ambitious programme of national reform to relaunch Italy’s stagnant domestic economy, including sweeping changes to the country’s legal system and bureaucracy.

The new version of the airline, he said, had to “be supported by its own wings, without subsidies”.

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