Restructuring aid for Czech Airlines

The European Commission approved on 19 September 2012 a restructuring aid of 100 million euros in favour of Czech Airlines.

In May 2010, the Czech state had notified to the European Commission their intention to restructure Czech Airlines with public funding. The following month, a 100 million loan was converted into capital by the state-owned company Osinek. The Commission had priory examined the modalities of this loan to determine if it had been granted on market conditions. In March 2012, it concluded that it had been the case and therefore excluded any state aid. At the same time, the Commission verified the compatibility of the loan conversion into capital with the guidelines on rescue and restructuring aid. In February 2011, it had expressed doubts on whether the restructuring plan notified by the Czech Authorities was sufficient to restore the airline’s viability and contained sufficient counterparts in favour the competition in order to limit the distortion brought by the notified aid.

After an in-depth investigation, the Commission concluded that the revised restructuring plan which covered a 5 years period was based on realistic assumptions and demonstrated the potential viability of the Czech airline within a reasonable timeframe. In accordance to the European guidelines on rescue and restructuring aid, the proposed capacity reduction, the sale of planes and the surrender of landing slots at European airports constituted sufficient “gifts” to the competitors. The beneficiary of the restructuring aid had also to contribute to the costs of the restructuring. Czech Airlines will do so by selling subsidiaries, an aircraft and other assets. It will also secure a private bank loan for an aircraft lease.

On the basis of these elements, the Commission declared on 19 September 2012 the aid compatible with the European regulation.