The EU Commission approves Danish public guarantee of up to €137 million to compensate an airline company for damage caused by COVID-19 outbreak (SAS)

State aid: Commission approves Danish public guarantee of up to €137 million to compensate airline SAS for damage caused by coronavirus outbreak*

The European Commission has found a Danish State guarantee of up to approximately €137 million on a revolving credit facility in favor of Scandinavian airline SAS to be in line with EU State aid rules. The measure aims at partly compensating the airline for the damage suffered due to the coronavirus outbreak.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: ”The aviation sector has been hit particularly hard by the coronavirus outbreak. The Danish public guarantee of up to €137 million will enable Denmark to compensate SAS for part of the damage suffered due to the coronavirus outbreak. We are working closely with Member States to find workable solutions to support companies in these difficult times, in line with EU rules.”

SAS is a major network airline operating in Denmark, Sweden and Norway. It has its main hub at Copenhagen airport and, under normal circumstances, provides two-thirds of intra-Scandinavian air connectivity. Since the start of the coronavirus outbreak, SAS has suffered a significant reduction of its services, resulting in high operating losses.

Denmark notified to the Commission an aid measure to partly compensate SAS for the damage suffered due to the cancellation or re-scheduling of its flights as a result of the imposition of travel restrictions introduced by Denmark to limit the spread of the coronavirus.

The support will take the form of a State guarantee on a revolving credit facility in favor of SAS. Denmark will guarantee up to approximately€137 million of such revolving credit facility.

The exact damage suffered by SAS as a result of the outbreak will be quantified after the coronavirus crisis, based on the airline’s operating accounts for the year 2020. The method used to quantify the damage will be subject to the Commission’s prior approval. Furthermore, should the Danish public support exceed the damage actually suffered by SAS due to the coronavirus outbreak a claw-back mechanism will be activated. In other words, all the public support received by SAS in excess of the actual damage suffered will be have to be returned to Denmark. The risk of the State aid exceeding the damage is therefore excluded.

The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for damage directly caused by exceptional occurrences.

The Commission considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the Member States to compensate for the damage linked to the coronavirus outbreak are justified.

The Commission found that the Danish measure will compensate the damage suffered by SAS that is directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the foreseen compensation does not exceed what is necessary to make good the damage.

The Commission therefore concluded that the scheme is in line with EU State aid rules.

Background

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under State aid control and do not require the Commission’s approval under EU State aid rules. In all these cases, Member States can act immediately.

When State aid rules are applicable, Member States can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities.

In this respect, for example:

  • Member States can compensate specific companies or specific 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. This is foreseen by Article 107(2)(b)TFEU.
  • State aid rules based on Article 107(3)(c) TFEU enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
  • This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In addition to the existing possibilities already foreseen by existing EU State aid rules, on 19 March 2020, the Commission adopted a State aid 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 outbreak. It was amended on 3 April 2020.

The Temporary Framework, based on Article 107(3)(b) TFEU, recognises that the entire EU economy is experiencing a serious disturbance. To remedy that, the Temporary Framework provides for the following types of aid: (i) Direct grants, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies from banks; (iii) Subsidised public loans to companies; (iv) Safeguards for banks that channel State aid to the real economy; (v) Public short-term export credit insurance; (vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees.

The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.56795 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 State Aid Weekly e-News.

More information on the temporary framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

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European Commission, The EU Commission approves Danish public guarantee of up to €137 million to compensate an airline company for damage caused by COVID-19 outbreak (SAS), 15 April 2020, e-Competitions April 2020, Art. N° 94292

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