On Friday, the EU Commission concluded its long-term review of Italian state aid to the airline Alitalia with an unusual decision.

This boils down to the fact that the aid was illegal, but in practice it has no consequences.

In two interrelated decisions, the EU competition authority found on the one hand that the state aid of 900 million euros that Italy granted the company in 2017 violated EU state aid law and must therefore be repaid with interest.

Werner Mussler

Business correspondent in Brussels.

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At the same time, the Commission approved the decision of an Italian court according to which the new state-owned airline ITA, which de facto inherits Alitalia and is due to launch on October 15, should not be considered Alitalia's legal successor. Therefore, ITA is not obliged to repay the state aid. Alitalia itself cannot pay the amount because it is insolvent.

Of course, ITA is to acquire the naming rights of the old company and continue to market as Alitalia in October. The capital injections of 1.35 billion euros, which the Italian state has already granted the ITA or will grant in the near future, are “in line with the market”, the commission stated. They are therefore not to be classified as unlawful aid. EU Competition Commissioner Margrethe Vestager justified the decision by saying that there was a “clear break” between Alitalia and the new airline ITA. The Italian state's investment in ITA was made on terms that would also be acceptable to a private investor. According to EU state aid law, it is not decisive for the assessment of subsidies whether a company is in state hands or not.

Vestager said it was up to Italy and ITA management to make the restart a success. “We will continue to do our part to ensure fair competition in the European aviation sector.” According to the competition watchdog, the “turning point” is expressed, for example, in the fact that the successor company will only operate around half of the previous Alitalia fleet. Investments in newer, more climate-friendly aircraft are planned.

The new company will essentially only operate profitable routes and accordingly receive fewer take-off and landing rights (slots). ITA will also only partially take over the handling and maintenance division of the previous company. These business areas are to be put out to tender. This should also apply to Alitalia's previous loyalty program MilleMiglia. The new company is to become more cost-effective as the old Alitalia employment contracts expire. The previous staff could be taken over at ITA, but only under "competitive" working conditions.