Brussels has been forced into an embarrassing climb-down over its previous ‘green light’ to what could amount to €3.7 billion in State Aid for loss-making Portuguese airline TAP (click here).
The reason lies in the unwavering campaign waged by low-cost Irish airline Ryanair, alleging violation of the Treaty of Europe and rules of competition (click here).
As a result of Ryanair’s various legal bids, the Tribunal of Justice of the European Union recently annulled approval for the €1.2 billion in emergency support for TAP, along with a similar decision to buoy up loss-making Dutch airline KLM.
The European Commission has thus had to gloss over the fracas by ‘passing a new decision’: this insists Portugal will not have to repay a cêntimo of the €1.2 billion handed over last year.
But as to the rest, the “deepened investigation” could now take a good three months.
Explain reports, the Commission will have to “evaluate whether the €3.2 billion restructuring plan conforms with European Union rules when it comes to State aid conceded to companies in difficulty”.
One could argue that surely this will have been the overriding question when the commission green-lighted the aid in the first place. But reports today are all for ‘resetting the picture’ and presumably trying to act as if everything is fine and dandy.
Said the commission’s vice-president Margrethe Vestager “efforts” will proceed “to develop a solid restructuring plan that guarantees TAP’s long-term viability without the need for continued State Aid”.
Again, one could argue that this should have been the basis of the initial decision to approve funding. Surely Brussels doesn’t agree with long-term viability that is dependent on State Aid?
What does seem to have changed is that the focus now will be on establishing whether the restructuring plan is ‘proportionate’ – or whether it depends “to excess” on public financing (which critics have always argued that TAP’s existence has…)
Brussels “will also evaluate whether the restructuring plan is accompanied by adequate measures to limit distortions in competition created by the aid”.
This last point should see Ryanair rejoicing.
So far however there has been little in the way of response.
For now, Portuguese headlines are reporting that the government is “congratulating itself” that it won’t be expected to pay back the €1.2 billion and focused on ensuring that it passes all the hurdles to get the rest of the funding.
ECO online admits this “wasn’t the answer the government had been hoping for”.
Only a few days ago, infrastructures minister Pedro Nuno Santos (a man ridiculed recently by Ryanair boss Michael O’Leary click here) said TAP restructuring plan was already “being executed” – and without a cash injection of between €3.4 and €3.7 billion by 2024 it couldn’t be achieved.
The company could go bust, he warned.
To recap, TAP declared losses of €1.4 billion last year. The €1.2 billion conceded as emergency aid has already been gobbled up.