State aid: Commission orders recovery of €360 million unlawful aid from Italian ground handling operator SEA Handling

Brussels, 26-12-2012 — /europawire.eu/ — The European Commission has concluded that around €360 million of state aid granted between 2002 and 2010 by SEA, the state-owned operator of the Milan Malpensa and Milan Linate airports, to its subsidiary SEA Handling, ground handling operator at the airports, is incompatible with EU state aid rules. The Commission’s investigation found that the capital injections carried out by SEA Handling’s state-owned shareholders procured an undue economic advantage to SEA Handling that its competitors, who have to operate without state subsidies, did not have. SEA Handling now needs to pay back the undue advantage with interest.

In June 2010, following a complaint, the Commission opened an in-depth investigation into capital injections carried out by SEA into its subsidiary in the period 2002-2010 (see IP/10/787).

The Commission’s investigation revealed that, given its consistently difficult financial situation, SEA Handling would have been unable to secure such financing from the market in 2002-2010. No private investor, operating under market conditions, would have accepted to grant this capital to the company. The repeated capital injections provided SEA Handling with an undue advantage that its competitors did not enjoy and therefore constitute state aid in the meaning of the EU rules.

The Commission then verified whether the state aid could be found compatible with EU rules. As SEA Handling was in financial difficulties throughout the period concerned, it could have lawfully received state aid under the conditions set in the EU Rescue and Restructuring Guidelines (seeIP/12/1042). However, the capital injections did not meet these criteria. SEA Handling’s business plan failed to demonstrate on the basis of sound and reliable assumptions how the company could become viable and operate without continued state support. Neither did it contain evidence that SEA Handling would be contributing to the cost of restructuring. Finally, it did not foresee any compensatory measures to minimise the competition distortions brought about by the significant state support received.

Given that these conditions were not met, Italy has to recover the aid received by SEA Handling, so as to restore the level playing field in the EU’s internal market.

Background

The Commission has the duty to monitor public funding granted to companies that have economic activities in the EU, to avoid that selected companies are kept in business through subsidies without competing on the merits.

Under EU State aid rules, interventions by public authorities in companies carrying out economic activities can be considered free of aid if they are made on terms that a private player operating under market conditions would have accepted (the “market economy investor principle” – MEIP). If the MEIP is not met, the intervention constitutes state aid in the meaning of EU rules.

In line with Article 107 of the Treaty on the functioning of the European Union (TFEU), such aid can be found compatible under certain circumstances, in particular because it furthers an objective of common interest, such as environmental protection, regional development or research, without unduly distorting competition between companies in the internal market.

The Commission has to assess whether the positive effects of the achievement of a common interest goal outweigh the unavoidable competitive advantage that a company receives through a subsidy. To do this, the Commission had adopted several sets of guidelines that set out the conditions for avoiding undue distortions of competition of particular state interventions, in accordance with the TFEU rules.

The guidelines applicable to SEA Handling are the 2004 EU Rescue and Restructuring Guidelines (see IP/04/856, MEMO/04/172) that set out the conditions under which companies in financial difficulties can receive state aid. The guidelines require in particular that the company must establish a sound restructuring plan that restores its long-term viability and enables it to function without continued state support. Moreover, the aid beneficiary needs to implement adequate compensatory measures aimed at minimising the distortions of competition created by the state support and make a significant contribution to the restructuring plan from its own resources. The guidelines also specify that a company may receive restructuring aid only once in ten years.

More information is available under case number SA.21420 in the State Aid Register on the competition website. New publications of state aid decisions are listed in the State Aid Weekly e-News.