The European Commission has initiated a detailed investigation to assess whether some support measures taken by Romania in favor of Blue Air Aviation comply with EU state aid rules, News.ro reports.

The Romanian airline Blue Air has been facing financial difficulties since 2019, and since March 2020, like other companies operating in the aviation sector, it has been severely affected by the coronavirus pandemic. As of November 2022, Blue Air ceased operations as the Romanian authorities temporarily suspended the license due to the company’s financial condition.

In August 2020, the Commission approved two measures in favor of Blue Air, namely:

• a state guarantee in the amount of approximately 28 million euros (approximately 137 million lei) to compensate for damages caused in the context of the coronavirus pandemic and travel restrictions aimed at limiting the spread of the virus imposed by Romania and other countries and
• a government guarantee of approximately EUR 34 million (approximately 164 million lei) related to the rescue loan, intended to partially cover Blue Air’s liquidity needs over the next six months.

Romania has committed to guarantee that the state guarantee linked to the loan expires after six months, or that it will notify the Commission of either a liquidation plan or a comprehensive restructuring plan for Blue Air in view of the state aid assessment.

In April 2021, Romania submitted to the Commission for the first time the Blue Air restructuring plan for the period August 2020 – September 2025. The plan, which has been updated several times, includes extending the aid credit guarantee for up to six years (the period during which the first six months of the rescue aid is included), thus allowing the aid to be paid out until 2026, foresees restructuring measures and involves private financing. In November 2022, the Romanian state repaid the loan and acquired 75% of the shares of Blue Air.

At this stage, the Commission is concerned that the restructuring plan and the aid measures put in place to support the plan do not comply with EU State aid rules, in particular the Guidelines on recovery and restructuring aid.

The commission will conduct a detailed investigation to determine whether its initial concerns are confirmed. In particular, the Commission will check whether:

the restructuring plan can restore Blue Air’s long-term viability without additional or prolonged public assistance;

Blue Air’s own contribution or market contribution to the restructuring costs is real, effective, sufficient and non-aid to ensure the proportionality of the restructuring aid;

there are adequate measures to limit the distortions of competition created by the restructuring of the internal market of air transport services.

The initiation of an in-depth investigation gives Romania and interested third parties, including the aid beneficiary, the opportunity to submit their comments. The EC states that the fact that the investigation has been started does not predict its outcome in any case.

EU state aid rules, in particular the Guidelines on rescue and restructuring aid, allow member states to support, under certain strict conditions, companies in difficulty. In particular, assistance may be provided for a period of up to six months (“rescue assistance”). After this period, the aid must be repaid, or the Member State must notify the Commission of a restructuring plan, which will be assessed under state aid rules. For restructuring aid to be approved, the plan must ensure that the viability of the company can be restored without any further support from the state, that the company makes a sufficient contribution to the costs of the restructuring and that the distortions of competition caused by the aid are eliminated. through compensatory measures, which include, in particular, structural or behavioral measures.