BRUSSELS (AP) — The European Union’s anti-trust watchdog on Friday ordered Italy to recover 900 million euros ($1.01 billion) from ailing air carrier Alitalia, saying that a probe found the loans to constitute illegal state aid.
Alitalia has been in financial troubles since 2008. The airline was in desperate need of funds in 2017 but had lost its access to credit markets due to its woes. To keep it afloat, the Italian government stepped in, providing two loans of 600 million and 300 million euros.
At the same time, the carrier entered special bankruptcy proceedings. The following year, the European Commission, which polices competition law in the 27 EU member countries, opened a probe into the government loans.
“The in-depth investigation has shown that first, the loans amount to state aid for Alitalia, and second that they are illegal under state aid rules,” commission Executive Vice-President Margrethe Vestager said in a statement.
“The two loans gave Alitalia an unfair advantage over its competitors on national, European and world routes. Hence, they constitute illegal state aid, and must now be recovered by Italy from Alitalia,” Vestager said.
She said the loans could not be considered rescue aid under the rules for companies in difficulty because they were not paid back within six months and because no restructuring plan had been agreed to get the airline back into the black.
Italy’s Economy Ministry announced in July that a new airline to replace Alitalia would take to the skies on Oct. 15. Alitalia’s last flights are expected to operate up until then. The ministry said the new carrier will be called ITA, which stands for Italia Trasporto Aereo, or Italy Air Transport.
The commission also said Friday that ITA would not be considered the economic successor of Alitalia and that an capital injections totaling 1.35 billion euros ($1.6 billion) into the new venture are in line with market conditions and as such are not considered to be illegal state aid.