The European Commission has found a French support measure of up to €1.4 billion in favour of Air France to be in line with EU State aid rules. The measure aims at compensating the airline for the damage suffered between 17 March and 30 June 2020 due to the coronavirus pandemic and the travel restrictions in place to limit the spread of the virus.
Air France is a major network airline operating in France. It is owned by the Air France-KLM Holding company, in which the French state holds a 28.6% participation. With a fleet of over 300 planes, Air France plays a very important role in the French economy, in terms of employment and connectivity for many French regions including those overseas (Départements et Régions d’outre-mer “DOM-TOM”).
The French support measure
France notified to the Commission an aid measure of up to €1.4 billion to compensate Air France for damages suffered between 17 March and 30 June 2020 as a direct result of the travel restrictions in place in France and other countries to limit the spread of the coronavirus. Because of these travel restrictions in place, the airline incurred significant operating losses and experienced a steep decline in traffic and profitability over this period.
This measure follows (i) €7 billion liquidity support for Air France that the Commission approved on 4 May 2020 (SA.57082); and (ii) a €4 billion measure to recapitalise the airline that the Commission approved on 6 April 2021 (SA.59913).
The aid will be granted in several tranches and may take the forms of grants, equity support or liquidity support.
The Commission assessed the measure under Article 107(2)(b) TFEU, which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or sectors for the damage directly caused by exceptional occurrences, such as the coronavirus outbreak. The Commission found in particular that the French measure will make good the damage that is directly linked to the coronavirus outbreak. It also found the measure to be proportionate, as the compensation does not exceed what is necessary to make good the damage.
On this basis, the Commission concluded that the French damage compensation measure is in line with EU State aid rules.
Background
State aid rules based on Article 107(2)(b) TFEU enable Member States to compensate specific companies or sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak.
Furthermore, on 19 March 2020, the Commission adopted the State aid COVID Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus pandemic. The COVID Temporary Framework has been amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021.
As announced in May 2022, the COVID Temporary Framework has not been extended beyond the set expiry date of 30 June 2022, with some exceptions.
In particular, (i) investment support towards a sustainable recovery to support private investment as a stimulus to overcome an investment gap accumulated in the economy due to the crisis; and (ii) solvency support to leverage private funds and make them available for investments in small and medium-sized enterprises (SMEs). They may still be put in place until 31 December 2023.
In addition, the COVID Temporary Framework already provides for a flexible transition, under clear safeguards, in particular for the conversion and restructuring options of debt instruments, such as loans and guarantees, into other forms of aid, such as direct grants, until 30 June 2023.
The COVID Temporary Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
Furthermore, on 23 March 2022, the Commission adopted the State aid Temporary Crisis Framework to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s war against Ukraine.
The Temporary Crisis Framework has been amended on 20 July 2022, to complement the Winter Preparedness Package and in line with the REPowerEU Plan objectives.
The Temporary Crisis Framework has been further amended on 28 October 2022 in line with the recent Regulation on an emergency intervention to address high energy prices (‘Regulation (EU) 2022/1854‘) and the Commission’s proposal on a new emergency regulation to address high gas prices in the EU and ensure security of supply this winter.
On 1 February 2023, the Commission sent to Member States for consultation a draft proposal, part of the Green Deal Industrial Plan, to transform the State aid Temporary Crisis Framework into a Temporary Crisis and Transition Framework with the aim to facilitate and accelerate Europe’s green transition. Member States now have the possibility to comment on the Commission’s draft proposal. The Commission intends to adopt the Temporary Crisis and Transition Framework in the coming weeks, taking into account the feedback received from the Member States.
The non-confidential version of the decision will be made available under the case number SA.104957 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.
More information on the COVID Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.