Commission’s Landmark Ruling: Estonian Air Slammed for Illegal State Aid

Written by | Tuesday, November 10th, 2015

The European Commission has drawn the final conclusion regarding Estonia’s state aid in favour of the national airliner Estonian Air saying that the aid provided the carrier with advantage over its competitors, which breached the EU state aid rules. As a result, Estonian Air has to pay back the aid that it had already received, which is about €85 million, as well as the interest. Moreover, the company is now not eligible for the extra €40 million of restructuring aid.

Estonian Air has been consistently loss-making for almost a decade and the Commission’s investigation has demonstrated that the aid measures cannot be legal under EU state aid rules because they are simply not able to make companies profitable again. Moreover, they often do not limit the distortions of competition created by the aid. Commissioner Margrethe Vestager, in charge of competition policy, explained that “companies should compete based on a sustainable business model rather than relying on continued support by the state to stay in the market”. She added that in case of Estonian Air, the state aid provided to the company was just a poor use of taxpayer money as it kept the company in the market artificially.

The Commission specified several measures provided to Estonian Air that were considered illegal, such as state capital injection of €17.9 million in November 2010, an additional state capital injection of €30 million in two tranches (December 2011 and March 2012), a rescue loan facility of €37 million provided by the state in several tranches between December 2012 and November 2014 as well as a planned additional state capital increase of €40.7 million. Under the EU rules, state aid can only be granted once in ten years to rule out the option that companies rely on public money to stay in the market.

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