State aid: Commission approves around €350 million Finnish support to compensate Finnair for damages suffered due to coronavirus outbreak

The European Commission has found €351.38 million of Finnish support in favour of Finnair to be in line with EU State aid rules. The measure aims at compensating the airline for the damage suffered due to the coronavirus outbreak between 16 March and 31 December 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The aviation sector has been particularly affected by the various travel restrictions imposed to contain the spread of the coronavirus. With the measure we approved today, Finland will compensate Finnair for damages directly suffered as a result of such restrictions.”

Finnair is a major network airline operating in Finland, with almost 15 million passengers transported in 2019 (67% of the total passengers transported within, to and from Finland in 2019). Before the coronavirus outbreak, Finnair operated a fleet of 59 planes with flights to more than 130 destinations, focusing especially on European and Asian markets. The restrictions in place both in Finland and in other destination countries in order to limit the spread of the coronavirus have heavily affected Finnair’s operations, in particular regarding international and intercontinental flights. As a result, Finnair incurred significant operating losses until at least 31 December 2020.

Finland notified to the Commission an aid measure to compensate Finnair for damages suffered between 16 March 2020 and 31 December 2020 due to the travel restrictions necessary to limit the spread of the virus:

• In the first compensation period, from 16 March to 30 June 2020, the notified measure will compensate Finnair for the overall loss of income caused by the travel restrictions imposed in Finland, EU and non-EU countries.
• In the second compensation period starting in July, given that many travel restrictions in the EU had already been lifted by then, the notified measure will compensate Finnair for the losses caused by remaining or new travel restrictions affecting specific routes.

The support will take the form of a hybrid loan in the amount of €351.38 million.

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 sectors for damage directly caused by exceptional occurrences.

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

The Commission found that the Finnish measure will compensate the damages suffered by Finnair that are directly linked to the coronavirus outbreak, since the loss of income of the overall business between 16 March 2020 and 30 June 2020, as well as on the selected routes between 1 July 2020 and 31 December 2020, can be considered as damage directly linked to the exceptional occurrence.

The Commission also found that the measure is proportionate, also beyond June 2020, as the route-by-route quantitative analysis submitted by Finland appropriately identifies the damage attributable to the containment measures, and therefore the compensation does not exceed what is necessary to make good the damage on those routes. Furthermore, the aid measure includes a claw-back mechanism, whereby any possible public support in excess of the actual damage received by the beneficiary will have to be paid back to the Finnish State. The risk of the State aid exceeding the damage is therefore excluded.

In addition, the Commission made sure that the current measure does not lead to a cumulation of aid in view of a State loan guarantee (SA.56809) and a recapitalisation (SA.57410) of Finnair approved by the Commission in spring 2020 under the State aid Temporary Framework.

On this basis, the Commission concluded that the Finnish damage compensation measure 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 case of particularly severe economic situations, such as the one currently faced by all Member States due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State aid Temporary Framework based on Article 107(3)(b) TFEU 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. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021, provides for the following types of aid, which can be granted by Member States: (i) Direct grants, equity injections, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies; (iii) Subsidised public loans to companies, including subordinated loans; (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; (xi) Targeted support in the form of equity and/or hybrid capital instruments; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.60113 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 Competition 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.