The EFTA Surveillance Authority greenlights state guarantee for Icelandic airline due to the COVID-19 pandemic (Icelandair)

COVID-19 Pandemic: ESA greenlights state guarantee for Icelandair*

Iceland will provide state aid to Icelandair to partly compensate for the damage resulting from travel restrictions linked to the COVID-19 outbreak.

Icelandair is an international passenger airline operating in Iceland. It contributes to nearly 75% of the domestic connectivity of Iceland and last year accounted for 68% of passengers carried to and from Iceland. Since the start of the coronavirus outbreak, Icelandair has suffered a significant reduction of its services, resulting in high operating losses.

“It is important for Iceland’s economy and to the free movement of citizens that air transport can continue to and from Iceland. We are cooperating closely with the Icelandic authorities and the Commission to find good ways to allow support to companies in these difficult times,” said Bente Angell-Hansen, President of the EFTA Surveillance Authority.

Iceland has chosen to aid Icelandair by way of a 90% state guarantee on a revolving credit facility of up to USD 120 million (around ISK 16,5 billion at the current exchange rate). The guarantee will likely result in lower financing costs for Icelandair. In 2021, Iceland will carry out an assessment of the actual damage suffered by Icelandair due to COVID-19, so that if public support exceeds the actual damage it can be returned to Iceland.

Under EEA rules, ESA assesses whether a proposed aid measure is compatible with EEA law before the aid is granted. ESA’s decision today is based on Article 61(2)(b) of the EEA Agreement, which enables the EEA EFTA States to compensate specific companies or specific sectors for the damage directly caused by exceptional occurrences, such as the COVID-19 outbreak. This includes measures to compensate companies in sectors that have been particularly hard hit, such as transport, tourism and hospitality.

Iceland notified the measure on 26 August 2020. A non-confidential version of the decision will be published here as soon as possible.

More practical information on state aid and COVID-19 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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EFTA Surveillance Authority, The EFTA Surveillance Authority greenlights state guarantee for Icelandic airline due to the COVID-19 pandemic (Icelandair), 27 août 2020, e-Competitions August 2020, Art. N° 96555

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