Green light from the Commission for Romania's public guarantee in favour of the airline Blue Air

On 20 August 2020, the Commission authorized Romania to grant to the airline Blue Air two state guarantees for a total amount of 62 million EUR. These public supports aim on the one hand to compensate the airline for the damage suffered as a result of the COVID-19 pandemic and on the other hand to meet its urgent liquidity needs.

Like many airlines, Blue Air has suffered a significant reduction of its activities due to the coronavirus crisis and travel restrictions introduced by Romania and other European countries.

As a company already in difficulty before 31 December 2019, Blue Air cannot therefore benefit from public support granted on the basis of the Temporary Framework on State Aid aimed at supporting the economy in the context of the European Commission COVID-19 pandemic.

Romania has therefore notified its public guarantee of around 28 million EUR on the basis of Article 107.2 b) of the TFEU which allows states to compensate companies for the damage suffered due to the COVID-19 pandemic. Indeed, in accordance with this provision, the Commission is compelled to declare compatible with the common market the “aid to make good the damage caused by natural disasters or exceptional occurrences.” The Commission declared in March 2020 that the COVID-19 pandemic constituted such an event, because of its exceptional and unforeseeable nature and its major repercussions on the economy. Several compensations of the damage caused by the pandemic have already been notified and approved by the Commission, for instance for the airlines Condor and SAS and for German airports and Timisoara Airport.

The Commission found that Romanian aid fulfilled all the conditions required for the granting of State aid within the meaning of Article 107.2 b) TFEU. It will allow compensation for the damage directly linked to the COVID-19 pandemic suffered by Blue Air without any risk of overcompensation, an external audit being responsible for verifying that the amount of aid granted does not exceed the damage actually suffered.

Romania has also notified the Commission its project of rescue aid in the form of a public guarantee of 34 million EUR on a loan intended to partly cover the urgent liquidity needs of Blue Air. This aid was notified in accordance with the Guidelines on State aid for rescuing and restructuring undertakings in difficulty. These allow Member States to grant rescue and / or restructuring aid to undertakings in difficulty under strict conditions and with prior notification to the European Commission. In June 2020, the Commission approved rescue aid for the airline TAP based on these Guidelines.

Romania committed within six months, either to terminate the guarantee or to inform the Commission of the liquidation of Blue Air, or to submit for Commission approval a restructuring plan which will allow the company to become viable in the long-term.

Therefore, the Commission concluded that the measure complied with the conditions set out in the Guidelines by minimizing the risks of distortion of competition within the single market. In addition, the Commission noted that the measure would ensure the orderly continuity of air services and help maintain regional connectivity.

This decision highlights the legal possibilities available for undertakings which were in difficulty before the start of the pandemic and which therefore cannot benefit from the specific measures put in place by the European Commission to support companies through this crisis.

It should be remembered that since the start of the crisis, many airlines have benefited from support measures from their respective States on the basis of the Temporary Framework in different forms: (i) recapitalization for Deutsche Lufthansa, Brussels Airlines, airBaltic and Finnair; (ii) compensation for damage caused by COVID-19 for Swedish airlines, French airlines and Condor; and (iii) rescue aid for TAP and SATA airline.