Adria aid investigation ongoing

Commission expected to rule on Adria aid by year’s end

A European Commission investigation launched in November last year into alleged state aid provided to Adria Airways is ongoing. These measures include four capital injections between 2007 and 2011 amounting to around 85.5 million euros. The Commission has doubts that they were granted on market terms. It is likely to make a ruling by the end of the year. Adria, as well as other interested parties, such as the Slovenian government, were invited to submit comments on the case in March 2013. In accordance with Article 14 of Council Regulation, all unlawful aid can be subject to recovery from the recipient, meaning Adria could be forced to pay back the entire sum of the multiple cash injections, which could have a significant financial impact on the airline and its operations.

The European Commission began a preliminary investigation into Adria in 2011. On March 11, 2011 Slovenia notified the Commission it was planning on approving a rescue aid package for Adria in the form of a state guarantee and a soft loan worth 6.2 million euros. Several exchanges of information took place afterwards. At a meeting with the Slovenian authorities on July 13, 2011, the Commission was informed that the rescue aid would not be sufficient. Slovenia withdrew its rescue aid notification on August 1, 2011. Following information that Slovenia had carried out a 50 million euro cash injection into Adria on September 30, 2011, without the EU’s approval, the Commission decided to launch a preliminary investigation. The government continued to pump money into Adria until the Commission launched a formal in depth investigation into Adria’s dealings just under a year ago. In addition, the Commission found that state owned holding company PDP and the majority state owned Ljubljana Airport acquired 52.3% and 47.7% of Adria Airways’ maintenance subsidiary Adria Airways Tehnika between October 2010 and March 2011.

For its part, the Slovenian carrier says, “We would like to stress that it is in the interest of Adria to prove that all the measures so far were carried out in accordance with the applicable legislation”. The Slovenian carrier believes the capital increase between 2007 and 2011 and the sale of shares of its subsidiary Adria Airways Tehnika do not represent state aid as all the investments met the criteria of the Market Economy Investor Principle. In June, low cost airline Ryanair requested the European Commission to make a swift ruling on the case. It said, “State aid was provided to Adria despite its inefficiencies while Ryanair has to develop its own market and is losing revenue”.

In 2012, both the Hungarian national carrier Malév and the Barcelona based Spanair declared bankruptcy and ceased operations after the Commission ordered the airlines to pay back state aid received by the Hungarian and regional Catalan governments respectively.