EU approves state aid for Croatia Airlines
The European Commission has found a Croatian grant of 11.7 million euros to Croatia Airlines to be in line with European Union state aid rules. Last month, the Croatian government approved the sum in the form of a direct grant, as well as an additional 46 million euro injection into its national carrier through a capital hike. The 11.7 million euros sum is aimed at compensating the airline for the losses directly caused by the coronavirus outbreak and the travel restrictions introduced by Croatia and other countries to limit the spread of the virus in the period between March 19, 2020 and June 30, 2020. This forced Croatia Airlines to cancel most of its scheduled flights and resulted in major losses in turnover.
In a statement, the EU’s executive branch said, “The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for the damages directly caused by exceptional occurrences, such as the coronavirus outbreak. The Commission found in particular that the Croatian measure will compensate damage that is directly linked to the coronavirus outbreak. An independent external audit firm will verify that the aid does not exceed the amount of damage suffered during the period between March 19, 2020 and June 30, 2020”. It added, “Following the audit, any public support received by Croatia Airlines in excess of the actual damage suffered will have to be returned to Croatia. The risk of overcompensation is therefore excluded”.
The Commission also found that the measure is proportionate as the compensation does not exceed what is necessary to make good the damage. On this basis, the Commission concluded that the Croatian measure is in line with EU state aid rules. Croatia Airlines registered a net loss of 32.1 million euros during the first nine months of the year, up from its loss of 6.5 million over the same period in 2019. The 46 million euro capital hike, which the government says is in line with the European Commission’s temporary framework for state aid measures to support the economy in the current Covid-19 outbreak, will be approved by the carrier at its shareholders meeting on December 14. It is aimed at returning the airline’s capital to pre-Covid levels i.e. to the same levels as on December 31, 2019.
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