Adria aid ruling this summer

Government preparing for Adria state aid ruling during the summer

The Slovenian government has confirmed the European Commission will hand down its judgment this summer on whether Adria Airways received illegal state aid between 2007 and 2011 to the tune of 85.5 million euros. The process is taking significantly longer than originally expected with the Commission recently requesting additional documentation from both the Slovenian carrier and the government. The Slovenian Ministry for Finance says it is standard procedure for the Commission to ask additional questions, particularly on the subject of Adria’s restructuring plans and whether the company will be viable after the process is completed. According to the ministry, the Commission focused most on the last capital injection in 2011 when the government pumped fifty million euros into the Slovenian carrier without notifying the European Union.

Adria could be ordered to pay back all of the alleged state aid it has received if the Commission finds it was contrary to European competition laws. However, the airline could also be forced to pay back only part of the state aid. Adria’s CEO, Mark Anžur, has previously said he is optimistic that the ruling will be in the airline’s favour but declined to give further comment on the issue. The European Commission has also declined to comment on the procedure saying only that the investigation is ongoing and that a decision will be made in due course.

The European Commission is also investigating Adria for the sale of its maintenance division, Adria Airways Tehnika, to sate owned holding company PDP and the majority state owned Ljubljana Airport who acquired 52.3% and 47.7% of the maintenance company between October 2010 and March 2011. The two have since decided to sell their shares in Tehnika, launching the company’s privatisation process earlier this January.

The European Commission’s decision is highly anticipated at Adria as it could seal the company’s fate. The airline’s cost cutting measures have proved relatively successful in the past two years with losses significantly reduced and passenger numbers starting to improve. The carrier has also drafted a business strategy for the next six years which will see the airline become a hybrid full fare - low cost airline. This summer, Adria is launching new routes and focusing on secondary bases outside of Slovenia. It has also recently inked codeshare agreements with both Royal Jordanian Airlines and Air Serbia and plans replace the unprofitable Bombardier CRJ200 jets with additional CRJ900 aircraft.