subject: state aid sa.58114 (2020/n) italy covid-19 aid to

22
S.E On. Luigi DI MAIO Ministro degli affari esteri e della cooperazione internazionale P.le della Farnesina 1 I - 00194 Roma Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 EUROPEAN COMMISSION Brussels, 4.9.2020 C(2020) 6194 final In the published version of this decision, some information has been omitted, pursuant to articles 30 and 31 of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […] PUBLIC VERSION This document is made available for information purposes only. Subject: State Aid SA.58114 (2020/N) Italy COVID-19 aid to Alitalia Excellency, 1. PROCEDURE (1) By electronic notification of 20 July 2020, 1 the Italian Republic notified aid to Alitalia Società Aerea Italiana S.p.A in Extraordinary Administration (“Alitalia”) in the form of a EUR 199.45 million grant under the fund established by Article 79 of Decree-Law No 18 of 17 March 2020 granting compensation to airlines affected by the COVID-19 outbreak (“the measure”), in accordance with 1 The notification followed preliminary exchanges between the Italian authorities and the Commission services, which started on 2 July 2020 with a first notification of a EUR 350 million aid in favour of Alitalia from the Italian authorities. The latter gave the Commission further information about that proposed aid measure during a call held on 13 July 2020. The Commission’s services sent a request for information on 14 July 2020. On 20 July 2020, the Italian authorities withdrew their first notification and notified the present aid measure. The Italian authorities replied to the request of information on 24, 27 and 28 July 2020. On 3 and 5 August 2020, the Commission services sent further additional requests for information to the Italian authorities that replied on 13 and 18 August 2020. On 20 and 31 August and 2 September 2020, Italy submitted additional information. The Italian authorities and the Commission services hold several conference calls throughout the notification procedure.

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Page 1: Subject: State Aid SA.58114 (2020/N) Italy COVID-19 aid to

S.E On. Luigi DI MAIO

Ministro degli affari esteri e della cooperazione internazionale

P.le della Farnesina 1

I - 00194 Roma Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

EUROPEAN COMMISSION

Brussels, 4.9.2020 C(2020) 6194 final

In the published version of this decision,

some information has been omitted,

pursuant to articles 30 and 31 of Council

Regulation (EU) 2015/1589 of 13 July 2015

laying down detailed rules for the

application of Article 108 of the Treaty on

the Functioning of the European Union,

concerning non-disclosure of information

covered by professional secrecy. The

omissions are shown thus […]

PUBLIC VERSION

This document is made available for

information purposes only.

Subject: State Aid SA.58114 (2020/N) – Italy – COVID-19 aid to Alitalia

Excellency,

1. PROCEDURE

(1) By electronic notification of 20 July 2020,1 the Italian Republic notified aid to

Alitalia – Società Aerea Italiana S.p.A in Extraordinary Administration

(“Alitalia”) in the form of a EUR 199.45 million grant under the fund established

by Article 79 of Decree-Law No 18 of 17 March 2020 granting compensation to

airlines affected by the COVID-19 outbreak (“the measure”), in accordance with

1 The notification followed preliminary exchanges between the Italian authorities and the Commission

services, which started on 2 July 2020 with a first notification of a EUR 350 million aid in favour of

Alitalia from the Italian authorities. The latter gave the Commission further information about that

proposed aid measure during a call held on 13 July 2020. The Commission’s services sent a request for

information on 14 July 2020. On 20 July 2020, the Italian authorities withdrew their first notification

and notified the present aid measure. The Italian authorities replied to the request of information on 24,

27 and 28 July 2020. On 3 and 5 August 2020, the Commission services sent further additional

requests for information to the Italian authorities that replied on 13 and 18 August 2020. On 20 and 31

August and 2 September 2020, Italy submitted additional information. The Italian authorities and the

Commission services hold several conference calls throughout the notification procedure.

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2

Article 108(3) of the Treaty on the Functioning of the European Union (“TFEU”).

On 4 September 2020, Italy amended and completed its notification.

(2) Italy exceptionally agrees to waive its rights deriving from Article 342 TFEU, in

conjunction with Article 3 of Regulation 1/1958,2 and to have the present decision

notified and adopted in English.

2. DESCRIPTION OF THE MEASURE

2.1. Objective of the measure

(3) Italy considers that the COVID-19 outbreak and the related governmental

restrictions severely affected the aviation sector in that Member State. In that

context, Decree-law No 18 of 17 March 20203 provides for the establishment of a

fund (‘the fund’) of EUR 350 million to make good the damage directly suffered

by airlines due to the imposition of travel restrictions and other containment

measures linked to the COVID-19 outbreak.

(4) To be eligible for damage compensation under the fund, a company must (i) hold

an air passenger license issued by the Italian Civil Aviation Authority (ENAC)

and (ii) be entrusted, on the date of adoption of Decree-Law No 18 (i.e. 17 March

2020) with public service obligations pursuant to Regulation (EC) No

1008/2008.4 A ministerial decree will establish the detailed arrangements for the

application of the provision providing for compensation under the fund.

(5) Alitalia meets the eligibility conditions to benefit from compensation under the

fund. Italy notified to the Commission the grant under that fund in favour of

Alitalia. Thus, the present decision only covers the assessment of the aid provided

to Alitalia.5

(6) Italy notified the measure under Article 107(2)(b) TFEU.

2.1.1. Travel restrictions linked to the COVID-19 outbreak

(7) The COVID-19 outbreak has resulted in travel restrictions imposed by Member

States and third countries and the closing down of the vast majority of passenger

air transport domestically, within the Union and globally.

2 Regulation No 1 determining the languages to be used by the European Economic Community, OJ 17,

6.10.1958, p. 385.

3 Decree-law of 17 March 2020, No 18, ‘Misure di potenziamento del Servizio sanitario nazionale e di

sostegno economico per famiglie, lavoratori e imprese connesse all'emergenza epidemiologica da

COVID-19’, as amended and converted into law by Law of 24 April 2020, n. 27, by Article 202 of

Decree-Law of 19 May 2020, n. 34 and by Law of 17 July 2020, n. 77.

4 Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008

on common rules for the operation of air services in the Community (Recast) OJ L 293, 31.10.2008, p.

3.

5 The scope of the present decision does not cover other potential beneficiaries eligible to receive

compensation from the fund or assess the conditions under which compensation can be granted under

the fund itself.

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(8) Within the Union, Italy was the first country to be hit by the COVID-19 outbreak.

Italy declared a state of emergency on 31 January 2020, when it reported its first

cases of COVID-19 infections, and that state of emergency was to last until 31

July 2020.6 On 29 July 2020, Italy prolonged the state of emergency until 15

October 2020. 7

(9) In the course of February 2020, Italy adopted several measures to contain the

spread of the COVID-19 pandemic. It suspended flights from China, Taiwan,

Hong Kong and Macao to Italy as of 7 February 2020. On 21 February 2020, to

contain the growing number of infected persons in Italy, the Ministry of Health

implemented quarantine measures on the Italian territory for all persons that were

present in zones with confirmed cases.8

(10) In addition, the rapid spread of COVID-19 led to the cancellation of events and

fairs:9 as of 25 February 2020,

10 in Northern Italy all sport events and competition

were suspended, while throughout the Member State all school and universities

were offered the possibility to organise distance learning until further notice and

cultural centres were closed on Sundays and all exams (school, driving license,

etc…) were cancelled. On 1 March 2020, by Decree No 6 of the Prime Minister,11

Italy reinforced the restrictions by locking down several cities in Northern Italy

and considerably restricting all economic, transport, religious, cultural, educative

and sport activities in several regions of Northern Italy, while imposing health

and sanitary measures throughout the country.12

On 4 March 2020, Italy extended

the restrictions applicable in the northern regions to the entire national territory.13

6 Deliberation of the Ministry Council adopted during the meeting of 31 January 2020 on the declaration

for six months of the state of emergency on the national territory as a result of the COVID-19

outbreak.

7 https://www.gazzettaufficiale.it/eli/id/2020/07/30/20G00112/sg.

8 https://www.gazzettaufficiale.it/eli/id/2020/02/22/20A01220/sg.

9 https://www.gazzettaufficiale.it/eli/id/2020/02/25/20A01278/sg.

10‘ Decree of the Prime Minister of 25 February 2020, ‘Ulteriori disposizioni attuative del decreto-legge

23 febbraio 2020, n. 6, recante misure urgenti in materia di contenimento e gestione dell'emergenza

epidemiologica da COVID-19’.

11 Decree of the Prime Minister of 6 March 2020, ‘Ulteriori disposizioni attuative del decreto-legge 23

febbraio 2020, n. 6, recante misure urgenti in materia di contenimento e gestione dell'emergenza

epidemiologica da COVID-19’.

12 https://www.gazzettaufficiale.it/eli/id/2020/03/01/20A01381/sg. The restrictions applicable in certain

regions of Northern Italy included for example the suspension of all competition and sport events, all

activities involving gatherings of people and all school activities, in addition to health measures such

as social distancing in public places, bars and restaurants; homeworking; closure on week-end of shops

and malls; etc.

13 http://www.governo.it/it/articolo/coronavirus-firmato-il-dpcm-4-marzo-2020/14241.

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(11) Several Member States, such as Austria,14

imposed limitations or bans on the

entry of persons coming from or through Italy. Such persons either were not

allowed to cross the borders of those Member States or had to undergo a period of

quarantine. Third countries also imposed limitations or travel warnings. For

example, on 28 February 2020 the United States of America advised its citizens to

avoid all but essential travel to Italy and not to travel to Lombardy and Veneto,

the worst affected regions at the time.

(12) On 8 March 2020, Italy imposed lockdown measures with immediate effect that

included travel restrictions in Northern Italy in response to the COVID-19

outbreak. Those general measures were extended to the entire national territory on

9 March 202015

with entry into force on 10 March 2020, and remained in force

until 2 June 2020.

(13) By Decree No 112 of 12 March 2020,16

the Ministry of Transport ordered the

closure of the majority of airports in Italy (except for 17 out of 39 commercial

airports in total where only governmental, cargo and emergency flights were

allowed). Those restrictions also covered all flights in Italy, with the exception of

those needed to ensure minimum essential services (health reasons, absolute

necessity). Those travel restrictions remained fully in force until 2 June 2020.17

(14) To contain the spread of the virus, on 16 March 2020 the Commission invited

Member States to apply a coordinated restriction on non-essential travel from

third countries to the Union for an initial period of 30 days,18

subsequently

extending it twice until 15 June 2020.19

The envisaged travel restriction, as well

as the invitation issued by the Commission on 11 June 2020 to prolong it until 30

June 2020, applied to all Schengen Member States (as well as Bulgaria, Croatia,

Cyprus, and Romania) and the four Schengen Associated States (Iceland,

Liechtenstein, Norway, and Switzerland) – 30 countries in total.20

14

The Austrian government released travel warnings regarding Italy and imposed partial restrictions on

travel to and from Northern Italy on 6 March 2020. The Romanian authorities did so as of 2 March

2020.

15 Decree of the Prime Minister of 9 March 2020, ‘Ulteriori disposizioni attuative del decreto-legge 23

febbraio 2020, n. 6, recante misure urgenti in materia di contenimento e gestione dell'emergenza

epidemiologica da COVID-19, applicabili sull'intero territorio nazionale’.

16 http://www.mit.gov.it/sites/default/files/media/notizia/2020-03/d.m.%20n.%20112%202020.pdf.

17 Italy prolonged Decree No 112 of 12 March 2020 on 12 and 29 April and on 17 May 2020, up to 2

June 2020.

18 Communication from the Commission to the European Parliament, the European Council and the

Council of 16 March 2020, COVID-19: Temporary Restriction on Non-Essential Travel to the EU,

COM/2020/115 final.

19 Communication from the Commission to the European Parliament, the European Council and the

Council of 8 May 2020 on the second assessment of the application of the temporary restriction on

non-essential travel to the EU, COM(2020) 222 final.

20 https://ec.europa.eu/info/live-work-travel-eu/health/coronavirus-response/travel-and-transportation-

during-coronavirus-pandemic_en

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(15) As of 3 June 2020,21

Italy lifted the ban on the free movement within Italy, as

well as to and from other Member States and the four Schengen Associated

States. The restrictions remained applicable for movements to third countries until

30 June 2020.22

(16) On 2 June 2020, Italy partially lifted the restrictions on air services, allowing air

services to be commercially performed in 23 Italian airports, while the rest of the

airports remained closed until further notice.23

Until 12 June 2020, air services to

Sardinia could only be operated on the basis of public service obligations. On 14

June 2020, Italy expanded the list of open airports to 24 airports.24

(17) Most Member States reopened their borders with other Member States and the

Schengen Associated States as of mid-June 2020,25

following the

recommendation of the Commission to lift the internal borders controls and

restrictions on free movement within the Union by 15 June 2020.26

On that date,

some Member States still kept their borders closed or accepted only citizens from

a very limited list of countries (e.g. Denmark and Portugal), while others kept

their borders closed for incoming travellers from Italy (e.g. Cyprus and Malta).

(18) On 1 July 2020, Italy lifted restrictions on travel to and from third countries.

However, on 2 July 2020, Italy issued an ordinance imposing a quarantine period

for incoming travellers from third countries and furthermore banned entry into

Italy for persons who had stayed in and transited in some specific third countries,

namely those where the spread of the epidemic reached high levels of

contamination.

2.1.2. Impact of the travel restrictions on Alitalia

(19) The measures adopted to contain the COVID-19 outbreak negatively affected the

European aviation sector, impairing airlines’ operations significantly. Estimates

by Eurocontrol show a significant decrease in flights between 9 March and 1 July

2020, between a minimum of 14% (on 9 March 2020) and a maximum of 93%

21

Decree-Law of 16 May 2020, No 33, ‘Ulteriori misure urgenti per fronteggiare l'emergenza

epidemiologica da COVID-19’.

22 Decree of the Prime Minister of 11 June 2020, “Ulteriori disposizioni attuative del decreto-legge 25

marzo 2020, No 19, recante misure urgenti per fronteggiare l'emergenza epidemiologica da COVID-

19, e del decreto-legge 16 maggio 2020, No 33, recante ulteriori misure urgenti per fronteggiare

l'emergenza epidemiologica da COVID-19”.

23 Joint Decree of the Ministry of Infrastructure and Transports and Ministry of Health No 227 of 2 June

2020.

24 Joint Decree of the Ministry of Infrastructure and Transports and Ministry of Health No 245 of 14 June

2020.

25 This was the case on 10 June 2020 for Slovakia; on 13 June 2020 for Romania and Poland; 15 June

2020 for Austria, Belgium, Croatia, Finland, France, Germany, Greece, the Netherlands, Czechia and

Sweden; on 17 June 2020 for Bulgaria and on 21 June 2020 for Spain.

26 Communication of 11 June 2020 from the Commission to the European Parliament, the European

Council and the Council on the third assessment of the application of the temporary restriction on non-

essential travel to the EU, COM/2020/399 final.

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(reached on 12 April 2020) in comparison to the number of flights operated on the

same dates in 2019.27

(20) According to Italy, Alitalia’s business activities were significantly affected by the

serious spread of the COVID-19 virus and by the disruptive effects that the virus

and the travel bans had on the air transport sector at European and world level,

causing a drastic reduction in the operating network and routes operated by the

company.

(21) Before the COVID-19 outbreak, Alitalia operated a fleet of 95 planes with flights

to 102 destinations. In February 2020, the rapid spread of the COVID-19

pandemic and the adoption of the first governmental restrictions started to affect

Alitalia’s operations substantially. Between 16 February and 10 March 2020, the

total number of passengers transported by Alitalia decreased by almost 60%

compared to the same period in 2019.28

(22) From 21 February 2020 onwards, Alitalia’s net ticket sales (sales minus refunds)

also strongly decreased compared to those of the previous year, as shown by

Graphic 1 :

Graphic 1

[…]

Source: Alitalia

(23) The net value of sales decreased from EUR […] million on 21 February 2020

down to EUR […] million (-83.33%) on 1 March 2020 and turned negative on 10

March 2020. In particular between 1 and 10 March 2020, the daily variation of

the net sales compared to the same period in 2019 decreased considerably (-95%)

as shown by Table 1:

Table 1

[…]

Source: Alitalia

(24) According to the Italian authorities, the general lockdown measures had a severe

impact on Alitalia’s activities since their adoption between March and June 2020.

Table 2 shows the significant reduction of Alitalia’s flight operations since March

2020:

27

Eurocontrol - COVID19 Impact on European Air Traffic – Comprehensive Assessment. Air Traffic

situation for Wednesday 1 July 2020 compared with equivalent period in 2019. Available at:

https://www.eurocontrol.int/publication/eurocontrol-comprehensive-assessment-covid-19s-impact-

european-air-traffic

28 During the three weeks between 16 February and 10 March 2020, Alitalia transported respectively

[300 000-400 000], [200 000 – 300 000] and [200 000 – 300 000] passengers. For the same period in

2019, Alitalia transported respectively [300 000 – 400 000], [300 000 – 400 000] and [500 000 – 600

000] passengers. Alitalia’s load factor went down from […]% in the second-last week of February

2020 to […]% in the last week of February and […]% in the first week of March, i.e. below the

industry-standard of 70% above which a route is considered to be profitable.

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Table 2: Alitalia’s flight operations (January-June 2020)

2020 Alitalia Jan Feb Mar Apr May Jun

Block Hours (000) [30-40]

[20-

30]

[10-

20]

[0-

10] [0-10]

[0-

10]

Departures (000) 15.0 13.7 5.5 1.7 2.1 3.0

Seats (mln) [2-5] [2-5] [0-3] [0-3] [0-3] [0-3]

Flying Fleet [90-100]

[90-

100]

[50-

60]

[20-

30]

[20-

30]

[20-

30]

Avg. Daily Util. (BH/Flying Fleet) […] […] […] […] […] […]

Number of routes 102 99 98 24 23 32

Source: Alitalia

(25) Alitalia’s flights operations for January-June 2020 starkly contrast with those

registered for the same period in 2019, as shown by Table 3:

Table 3: Evolution of Alitalia’s flight operations between January-June 2019 and January-June 2020

Diff.% 2020 vs. 2019 Jan Feb Mar Apr May Jun

Block Hours (000) -7% -4% -62% -90% -91% -89%

Departures (000) -4% -3% -63% -89% -87% -83%

Seats mln -4% -4% -62% -89% -86% -86%

Flying Fleet -4% -4% -40% -73% -77% -75%

Avg. Daily Util. (BH/Flying

Fleet) -3% -4% -36% -65% -59% -54%

Number of routes 0% -1% -7% -77% -79% -75%

Source: Alitalia

(26) Due to the COVID-19 outbreak and the travel bans imposed by the competent

authorities, Alitalia parked up to [40-50]% of its fleet in March 2020, [70-80]% in

April 2020, [70-80]% in May 2020 and [70-80]% in June 2020. In addition to the

grounding of most of its fleet during the period from March to June 2020, Alitalia

operated on requests from the crisis unit of the Italian Ministry of Foreign Affairs

a large number of special repatriation flights, in many cases from countries and

airports not included in Alitalia’s previous network.29

Between March and June

29

See for example http://corporate.alitalia.it/en/media/press-releases-sai/2020-03-20.html.

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2020, Alitalia operated a total of […] special flights, in addition to the minimum

daily flights maintained to ensure essential services on domestic routes.

(27) Based on the traffic figures provided by Italy for the period from 1 March to 30

June 2020, Alitalia recorded a steep decline in passenger traffic as compared to

the same period in 2019.30

Table 4 shows that significant traffic reduction by

comparing the Available Seat Kilometre (ASK),31

Revenue per Available Seat

Kilometres (RASK),32

Revenue Passenger Kilometre (RPK)33

and Seat Load

Factor (SLF)34

figures of Alitalia for the period between March and June 2020

with those for the same period in 2019.

Table 4: Alitalia’s ASK, RASK, RPK and SLF, figures for March– June 2020

March 2020 2019

ASK (billions) […] […[ [58%]

RASK (EUR cent) […] […] [44%]

RPK (billions) […] […] [76%]

SLF […] […] [42%]

April 2020 2019

ASK (billions) […] […] [92%]

RASK (EUR cent) […] […] [62%]

RPK (billions) […] […] [98%]

SLF […] […] [74%]

May 2020 2019

ASK (billions) […] […] [94%]

RASK (EUR cent) […] […] [32%]

30

The number of passengers transported by Alitalia decreased by 80% in March 2020, 97% in April

2020, 95% in May 2020 and 87% in June 2020 compared to the same months in 2019.

31 Available seat kilometre (ASK) is a measure of an airplane's carrying capacity available to generate

revenues. It refers to how many seat kilometres are actually available for purchase on an airline. Seat

kilometres are calculated by multiplying the number of kilometres that a given airplane will be flying

on a route by the number of seats available on that airplane. ASK can be used to assess how efficient

an airline is at generating revenues from the availability of seats to customers. Thus the airline operates

at below capacity if all the seats on the plane are not sold.

32 The revenue per available seat kilometre (RASK) measures the total operating revenue an airline

generates per seat (empty or full) per kilometre flown. That indicator gives relevant information on the

financial performance and efficiency of an airline as it includes all operating revenues (baggage fees,

reservation change fees, inflight meals, etc.). In theory, the higher the RASK, the more profitable the

airline.

33 The revenue passenger kilometre (RPK) shows the number of kilometre travelled by paying

passengers. It is calculated by multiplying the number of paying passengers by the distance travelled.

For example, an airplane with 100 passengers that flies 250 kilometres has generated 25.000 RPK.

34 The seat load factor (SLF) is an airline industry metric that measures how much of an airline’s

passenger carrying capacity is used. It is a percentage indicating how effective the airline is at selling

seats and earning revenues.

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RPK (billions) […] […] [98%]

SLF […] […] [69%]

June 2020 2019

ASK (billions) […] […] [94%]

RASK (EUR cent) […] […] 49%

RPK (billions) […] […] [95%]

SLF […] […] [23%] Source: Alitalia.

(28) The offering of Alitalia (ASK) in March 2020 was at 45% of pre-crisis level

(January 2020) and at 58% of the level of March 2019. The offering decreased by

94% in May and June 2020 compared to the same period in 2019. In parallel, the

RPK drastically decreased from […] billion in January 2020 to […] billion in

May 2020 (98% decrease compared to May 2019), as a consequence of both a fall

in revenues and in the number of kilometres flown.35

Hence, Alitalia registered

very low SLF figures between March and June 2020 with an average SLF of

[…]% during that period compared to […]% on the same period in 2019.

(29) According to Italy, as of 3 June 2020, despite the lifting of lockdown restrictions

and the partial reopening of air services in Italy, Alitalia’s activities were still low

as compared to February 2020 and the previous year. In particular, the ongoing

closure of many airports in Italy, such as Milan Linate,36

as well as the borders

restrictions still in place in the rest of the Union and with third countries forced

Alitalia to maintain a low level of activity. The net sales registered by the

company between 3 and 15 June 2020 decreased by 80.5% compared to the same

period in 2019.37

(30) Table 5 gives an overview of Alitalia’s flights operations during the period

running from 3 to 15 June 2020 compared to the same period in 2019:

Table 5

Intercontinental International National Total

variation

Departures -98,6% -91,8% -78,5% -84,3%

35

Alitalia continued to operate special flights throughout the crisis so that the number of kilometres

decreased to a lesser extent than the revenues generated per passenger.

36 Alitalia has a secondary hub in Milan Linate where it serves mostly domestic flights. Milan Linate

reopened on 13 July 2020.

37 Alitalia registered EUR […] of net sales against EUR […] in 2019. The company also registered EUR

[…] of total sales, which was 73.4% less than in 2019.

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Seats

offered -99,3% -94,2% -84,6% -89,2%

Passengers

transported -99,4% -94,4% -83,2% -88,8%

Routes

operated -17 -55 -22 -94

Source: Alitalia

(31) According to Italy, the immediate post-lockdown period hugely affected Alitalia’s

operations, and particularly intercontinental and international flights because,

despite the lifting of the lockdown in Italy, most foreign countries, including most

Member States, continued to apply limitations to air transport, which de facto

forced most of Alitalia’s fleet to be grounded until at least 15 June 2020.

2.2. National legal basis

(32) The legal basis for the aid measure is Article 79(1) and (2) of Decree-law No 18

of 17 March 2020. A joint ministerial decree adopted by the Ministry of

Economic Development, the Ministry of Economy and Finance and the Ministry

of Infrastructure and Transport will lay down the detailed arrangements for the

application of that provision.

(33) On 14 August 2020, the Italian authorities adopted the Decree-Law No 10438

(the

‘August decree’) allowing the Ministry of Infrastructure and Transport to grant

aid in the form of a direct grant up to EUR 250 million to companies meeting the

eligibility conditions established by Decree-Law of 17 March 2020 to receive

compensation under the fund, and which requested or will request the aid. The

August Decree aimed at preserving the continuity of the air services in the context

of the COVID-19 outbreak, pending the outcome of a notification procedure

before the European Commission.39

2.3. Form and budget of the measure

(34) The measure will take the form of a grant. The budget is set at EUR 199.45

million and is to be paid from the general budget of the Italian State.

(35) Italy confirms that the notified aid to Alitalia will be net of any amount recovered

by insurance, litigation, arbitration or other source for the same damage. If the aid

is paid out before such amounts have been established and paid, Italy will recover

38

Decree-Law of 14 August 2020, No 104 ‘Misure urgenti per il sostegno e il rilancio dell'economia’.

39 The August Decree refers to a pending notification concerning compensation to be paid under the fund

set up to compensate airlines under Article 79(2) of Decree-Law of 17 March 2020. The Commission

observes however that Italy only notified an aid to Alitalia; there is no pending notification procedure

concerning compensation to be paid under the fund at the time of adoption of the present decision.

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an amount corresponding to such compensations from the beneficiary in a second

step.

2.4. Administration of the measure

(36) The measure will be managed by the Ministry of the Economic Development, the

Ministry of Economy and Finance and the Ministry of Infrastructure and

Transport.

2.5. Beneficiary

(37) The beneficiary of the measure is Alitalia Società Aerea Italiana SpA.

(38) In May 2017, Alitalia - Società Aerea Italiana S.p.A. and its wholly owned

subsidiary Alitalia Cityliner S.p.A. were placed in extraordinary administration

pursuant to national insolvency legislation by decrees of the Italian Ministry of

Economic Development respectively of 2 and 12 May 2017. They were declared

insolvent by judgment by the Court of Civitavecchia on 11 and 26 May 2017.

(39) At the date of the adoption of the present decision, Alitalia and Alitalia Cityliner

S.p.A. are subject of two formal investigation proceedings by the Commission.40

(40) Alitalia is a major network airline operating in Italy. Before the COVID-19

outbreak, Alitalia served more than 100 destinations all over the world, carrying

over 21 million passengers from its main hub at Rome Fiumicino and other

airports in Italy. Alitalia is one of the largest Italian employer with over 11,000

employees.

2.6. Eligible costs and modalities for compensation

(41) Italy proposed two different approaches to assess the eligible costs.

2.6.1. The net losses methodology

(42) According to Italy, the eligible costs correspond to the damages directly suffered

by Alitalia during the period running from 1 March until 15 June 2020.41

Italy

defines the damages as the net losses due to the containment measures taken by

governments as a consequence of the COVID-19 outbreak.

(43) The net losses in that period are quantified as the difference between the

profit/loss incurred between 1 March and 15 June 2020 and those incurred during

the same period in 2019. That calculation takes into account the following

elements:

40

See State aid SA.48171 (2018/C) (ex 2018/NN, ex 2017/FC) — Alleged State aid in favour of Alitalia

(published in the OJ on 20.07.2018, JOCE C/256/2018) and State aid SA.55678 - New loan to Alitalia

(not yet published in the Official Journal).

41 Italy indicated that it is likely that Alitalia will incur losses caused by the COVID-19 outbreak also in

subsequent periods (i.e. as from 15 June 2020, when Alitalia resumed parts of its flight operation, until

at least the end of 2020).

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(a) loss of revenue: a review of the impact of the containment measures taken

by governments as a consequence of the COVID-19 outbreak on total

revenue, including (i) fare revenues from tickets (tickets which could not

be sold), and (ii) additional / accessory revenues (seat reservation,

upgrades);

(b) additional and avoided costs: a review of Alitalia’s cost base and the

impact (both positive and negative) of the containment measures taken by

governments as a consequence of the COVID-19 outbreak on variable

costs, including deviation in (i) all variable costs (in particular fuel costs,

fees and charges, maintenance costs, IATA commissions and catering

costs), (ii) fixed costs which varied due to the containment measures taken

by governments as a consequence of the COVID-19 outbreak (in

particular lower personnel costs and marketing costs). Costs items do not

include any refund (effectively paid or to be paid).

(44) The Italian authorities explained that, given its extraordinary administration since

2017, Alitalia is not required to comply with standard accounting rules.42

Consequently, to establish the net losses, Alitalia submitted an ad hoc list of all

revenues and costs related to flight activities and detailed them item per item on a

monthly basis, both for the period from 1 March to 15 June 2020 and the same

period in 2019.43

The auditing firm PriceWaterhouseCoopers S.A certified

Alitalia’s damage calculation.

(45) On that basis, by comparing revenues and costs of the period from 1 March to 15

June 2020 with the same period in 2019, the Italian authorities calculated

Alitalia’s net losses due to the COVID-19 outbreak and the travel restrictions at

EUR 211.85 million.

2.6.2. The EBITDA44

methodology

(46) Italy proposed another evaluation of the damages directly suffered by Alitalia due

to the COVID-19 outbreak by comparing the EBITDA figures of Alitalia for 1

March to 30 June 2020 to the same period in 2019.45

According to that

42

Art. 61 of Decree-Law of 8 July 1999, No 270, “Nuova disciplina dell'amministrazione straordinaria

delle grandi imprese in stato di insolvenza, a norma dell'articolo 1 della legge 30 luglio 1998, n. 274”

and Art. 205 of Royal Decree of 16 March 1942, No 267, ‘Disciplina del fallimento, del concordato

preventivo, dell'amministrazione controllata e della liquidazione coatta amministrativa’ (Insolvency

Law).

43 Italy submitted the list of revenues and costs monthly generated between March and June 2020 as well

as for the same period in 2019. During that period in 2020, Alitalia registered a total net loss of EUR

254 million. To limit the calculation of the damages to 15 June 2020, Italy deducted the minor

revenues of the second half of the month (16-30 June) calculated on a daily basis from the overall

amount. As for the costs, Italy was not in a position to apply the same methodology, since the relevant

data were only available on a monthly basis. The minor costs incurred in the month of June 2020 have

been, thus, divided on a 50/50 basis and deducted accordingly from the overall amount calculated.

44 EBITDA stands for earnings before interest, taxes, depreciation and amortisation.

45 Italy also provided EBIT data. However, depreciations and amortizations in Alitalia’s 2019 accounts

show a significant degree of volatility, reflecting accounting issues rather than the underlying

economic evolution of the asset base. As a consequence, very large depreciations and amortizations

attributed to March 2019 would lead to an underestimation of Alitalia’s net losses in March 2020.

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methodology, the estimated net losses registered between March and June 2020

amounted to EUR 232.26 million compared to the corresponding period in 2019,

as shown by Table 6:

Table 6: Alitalia’s EBITDA from March to June 2020 vs. 2019 (EUR million)

March April May June March-June

EBITDA 2019 […] […] […] […] [50-80]

EBITDA 2020 […] […] […] […] [(150) (180)]

Net losses -90,02 -41,21 -35,41 -65,62 -232,26

(47) Italy then further adjusted the calculation of the damages to the period from 1

March to 15 June 2020. Since no daily EBITDA data were available, Italy

allocated 50% of the net losses suffered in June 2020 compared to June 2019 to

the first half of the month.

(48) Thus, on the basis of the EBITDA comparison between 2019 and 2020, the total

net losses of Alitalia due to the COVID-19 outbreak between 1 March and 15

June 2020 are estimated at EUR 199.45 million compared to the corresponding

period in 2019, as shown by Table 7:

Table 7: Alitalia’s EBITDA from 1 March to 15 June 2020 vs. 2019 (EUR million)

March April May 1-15 June 1 March - 15

June

Net losses -90,02 -41,21 -35,41 -32,81 -199,45

2.7. Cumulation

(49) The Italian authorities confirm that the aid cannot be cumulated with other aid

(also de minimis) covering the same eligible costs.

2.8. Commitments

(50) Italy commits to define in the ministerial decree referred to in Article 79(2) of

Decree Law No 18 of 17 March 2020, the methodology for calculating the

damages suffered by Alitalia from 1 March to 15 June. The methodology will

allow to calculate the net losses (defined as the loss of revenues minus avoided

costs) assessed in comparison with the year prior to the exceptional occurrence.

Italy will apply that methodology in compliance with the international

EBITDA data is instead immune to that effect and provides a more reliable base for damage

estimation.

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accounting standards, commonly used for the formulation of EBITDA, to the

extent they are applicable to companies under extraordinary administration.

3. ASSESSMENT

3.1. Legality of the measure

(51) Pursuant to Article 108(3) TFEU, when the Commission has been notified of

plans to grant aid, the Member State concerned must not grant the aid until the

Commission adopted a decision approving that aid (“the standstill obligation”).

(52) According to Article 79(1) and (2) of Decree-Law No 18 of 17 March 2020, the

granting of the aid to compensate airlines that meet the eligibility criteria to

benefit from compensation under the fund46

for damages suffered due to the

COVID-19 pandemic is subject to the prior authorisation of the Commission.

(53) On 14 August 2020, as stated in recital (33), Italy adopted the August Decree

authorising the Ministry of Economic Development to provide advance payment

in the form of a direct grant of up to EUR 250 million to airlines that qualify for

such compensation from the fund. Since it is an act conferring the right to receive

the aid from the State budget, the Italian authorities adopted a legally binding act

by which they undertook to grant the aid to any beneficiary of the fund that has

requested or will request it, including Alitalia.47

On the basis of the August

Decree, an advance payment can be granted upon request of the beneficiary.

(54) It follows that the Italian authorities granted the measure in breach of the

standstill obligation. The measure is therefore illegal under Article 108(3) TFEU.

3.2. Existence of State aid

(55) Article 107(1) TFEU defines State aid as any aid granted by a Member State or

through State resources in any form whatsoever which distorts or threatens to

distort competition by favouring certain undertakings or the production of certain

goods shall, in so far as it affects trade between Member States.

(56) For a measure to be categorised as aid within the meaning of

Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled.

First, the measure must be imputable to the State and financed through State

resources. Second, it must confer an advantage on its recipients. Third, that

advantage must be selective in nature. Fourth, the measure must distort or

threaten to distort competition and affect trade between Member States.

(57) The measure is imputable to the State, since it is administered by the Ministry of

the Economic Development, the Ministry of Economy and Finance and the

Ministry of Infrastructure and Transport. It is financed through State resources,

since the measure will be paid out from the general budget of the State.

46

See recital (3).

47 See judgment of 14 January 2004, Fleuren Compost v Commission, Case T-109/01, EU:T:2004:4,

paragraph 74.

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(58) The measure confers an advantage on Alitalia in the form of a grant. No market

operator would provide a grant to Alitalia. The measure thus relieves the

beneficiary of costs that it would have had to bear under normal market

conditions.

(59) The measure is selective, since it is granted to Alitalia as opposed to other airlines

that do not fulfil the eligibility requirements to benefit from the fund. Equally, the

measure is selective in that the fund from which Alitalia receives compensation is

only open to the aviation sector.

(60) The measure is liable to distort competition, since it strengthens the competitive

position of Alitalia. It also affects trade between Member States, since Alitalia is

active in the aviation sector, in which intra-Union trade exists.

(61) In view of the above, the Commission concludes that the measure constitutes aid

within the meaning of Article 107(1) TFEU. The Italian authorities do not contest

that conclusion.

3.3. Compatibility

(62) Article 107(2)(b) TFEU covers aid which is, in law, compatible with the internal

market, provided that it satisfies certain objective criteria. Since this is an

exception to the general principle stated in Article 107(1) TFEU that State aid is

incompatible with the internal market, Article 107(2)(b) TFEU must be

interpreted narrowly. Therefore, only damage caused by natural disasters or

exceptional occurrences may be compensated for under that provision. There

must be a direct link between the damage suffered by an undertaking and the

exceptional occurrence, and the compensation must not exceed the amount of

damage.

(63) Where those criteria are satisfied, the Commission is bound to declare such aid

compatible with the internal market, and it has no discretion in that regard.

Therefore, the existence of two formal investigation procedures in respect of

previous measures granted to Alitalia ongoing at the time of adoption of the

present decision (see recital (40)) does not preclude the Italian authorities from

granting aid under Article 107(2)(b) TFEU.

3.3.1. The notion of exceptional occurrences with the meaning of Article

107(2)(b) TFEU

(64) Article 107(2)(b) TFEU provides that aid to make good damage caused by natural

disasters or exceptional occurrences shall be compatible with the internal market.

Neither the TFEU nor Union legislation contains a precise definition of the notion

of exceptional occurrence. As they constitute exceptions to the general

prohibition of State aid within the internal market laid down in

Article 107(1) TFEU, the Commission, in line with the consolidated Union case-

law48

has consistently held that the notions of ‘natural disaster’ and ‘exceptional

48

Judgment of the Court of Justice of 11 November 2004, Spain v Commission, C-73/03,

EU:C:2004:711, paragraph 37 and judgment of the Court of Justice of 23 February 2006, Atzeni and

others, in Joined Cases C-346/03 and C-529/03, EU:C:2006:130 paragraph 79.

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occurrence’ referred to in Article 107(2)(b) TFEU must be interpreted

restrictively.

(65) The characterisation of an event as being an exceptional occurrence is made by

the Commission on a case-by-case basis, having regard to its previous practice in

the field.49

In that regard, the following indicators relating to the event concerned

must be cumulatively met: (i) unforeseeable or difficult to foresee;50

(ii)

significant scale/economic impact51

and (iii) extraordinary, i.e. differ sharply from

the conditions under which the market normally operates.52

3.3.2. COVID-19 outbreak as an exceptional occurrence

(66) Following the first reports of cases of acute respiratory syndrome (COVID-19) in

the Wuhan municipality in China at the end of December 2019, the Chinese

authorities identified a novel coronavirus (SARS-CoV-2) as the main causative

agent, which had not been previously identified in humans. The outbreak rapidly

evolved, affecting not only other parts of China but has also spread to the

majority of countries worldwide, including all Member States. Outbreaks of novel

virus infections among people are always a public health concern and can have a

significant economic impact. Specific sectors and areas are particularly affected

by the outbreak, be it because of national outbreak control measures, travel

restrictions or supply chain disruptions.

(67) The World Health Organization (“WHO”) warned about the very high risk that

COVID-19 would spread and have a global impact. The subsequent spread of

COVID-19 ultimately resulted in far-reaching disruption of various economic

49

Exceptional occurrences which have been accepted in the past by the Commission include war,

internal disturbances and strikes, and, with certain reservations and depending on their extent, major

industrial accidents which result in widespread economic loss, see Guidelines for State aid in the

agricultural and forestry sectors and in rural areas 2014 to 2020, paragraph 330 (OJ C 204, 1.07.2014,

p. 53).

50 Commission decision of 1 August 2008 in case SA.32163, Remediation of damage to airlines and

airports caused by seismic activity in Iceland and the volcanic ash in April 2010, Slovenia, paragraph

31, OJ C 135, 9.5.2012, p. 1.

51 Elements taken into account by the Commission to consider that the occurrence reached a significant

scale: negative consequences cannot be contained (Commission decision of 4 October 2000 in case

NN 62/2000, Régime temporaire d'aides aux entreprises victimes des intempéries et de la marée noire

– France, OJ C 127, 29.05.2003, p. 32), or the number of dead or injured people (Commission decision

of 11 April 2012 in case SA.33487, Agricultural and fisheries aid to compensate for damage due to

exceptional occurrence (red mud "Aluminium accident"), Hungary, paragraph 35, OJ C 120,

25.04.2012, p. 1; Commission decision of 2 May 2002 in case N241/2002, Régime en faveur des

entreprises victimes de la catastrophe industrielle de Toulouse, France, paragraph 19, OJ C 170,

16.07.2002, p. 16), the immense ecological and economic damage (Commission decision of 11 April

2012 in case SA.33487, paragraph 36, OJ C 120, 15.04.2012, p. 1), the amount of material damage,

despite the local character of the industrial accident (Commission decision of 2 May 2002 in case N

241/2002, paragraph 19, OJ C 170, 16.07.2002, p. 16).

52 In its decision of 19 May 2004 in case C-59/2001 (OJ L 62, 2007, p. 14), the Commission considered

that the (alleged) fall in sales of poultry meat in a Member State not directly affected by the dioxin

contamination did not in itself constitute an exceptional occurrence. Even though it was an

unforeseeable event, it formed part of the normal commercial risks to which an undertaking is

exposed.

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sectors. That disruption was thus clearly outside the normal functioning of the

market. In order to avoid an exponential increase in the number of cases,

accompanied by social alarm and severe economic consequences, containment

measures needed to be adopted.

(68) On 11 March 2020, the WHO characterised the COVID-19 disease as a

pandemic. The public health risk deriving from the absence of therapeutics or

vaccines for the novel COVID-19 virus determined the exceptionality of the

circumstances. The rapidity of the spread caused enormous consequences both in

terms of fatal outcomes in high-risk groups and in terms of economic and societal

disruption.53

The necessity to adopt and encourage the respect of measures aimed

at interrupting transmission chains stemmed from that acknowledgement.

(69) Since March 2020, Member States adopted various measures that aimed to limit

the spread of the coronavirus, e.g. travel restrictions for non-essential travels,

closure of borders, closure of non-essential shops, obligation for companies to

organise working from home for every position where this is possible and various

social distancing measures.

(70) In view of the above, the COVID-19 outbreak qualifies as an exceptional

occurrence, as it was not foreseeable and is clearly distinguishable from ordinary

events, by its character and its effects on the affected undertakings and the

economy in general, and therefore falls outside the normal functioning of the

market.

(71) In this context, the COVID-19 outbreak can be considered as an exceptional

occurrence within the meaning of Article 107(2)(b) TFEU.54

3.3.3. Causal link between the damage to be compensated by the notified

measure and the COVID-19 outbreak

(72) The Commission has examined the notified measure pursuant to Article 107(2)(b)

TFEU, which requires a direct link between the damage and the exceptional

occurrence for which the State aid measure provides compensation. That

assessment has led to the following observations.

(73) As described in detail in section 2.1.1, the COVID-19 outbreak has resulted in

travel restrictions all over the world and the closing down of the vast majority of

passenger air transport. Those containment measures were intended to avoid the

spread of the virus, but they negatively affected the aviation sector. The damage

suffered by Alitalia is directly linked to the COVID-19 outbreak through the

effects on the flights of Alitalia of the travel restrictions and other containment

53

ECDC’s Rapid Risk Assessment, Outbreak of novel Coronavirus disease 2019 (COVID-19): increase

transmission globally – fifth update, 2 March 2020.

54 See Commission Decision of 12 March 2020 in State aid case SA.56685 (2020/N) – Denmark –

Compensation scheme for cancellation of events related to COVID-19, OJ C 112, 03.04.2020, and

Commission Decision of 31 March 2020 in State aid case SA.56765 (2020/N) – France – COVID-19

Moratoire sur le paiement de taxes et redevances aéronautiques en faveur des entreprises de transport

public aérien sous licences d'exploitation délivrées par la France.

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measures imposed by the Italian government and other governments around the

world.

(74) The notified measure aims at compensating Alitalia for the damage suffered due

to the cancellation of its flights as a result of the imposition of travel restrictions

and other containment measures linked to the COVID-19 outbreak (recital (3)).

For the calculation of the damage, the Italian authorities have considered the

reference period running from 1 March to 15 June 2020 (see section 2.1.1).

(75) The Commission considers that, for the purposes of calculating the damage

subject to possible compensation under Article 107(2)(b) TFEU, net losses

occurring during the national lockdown period (10 March to 2 June 2020) and the

days immediately before (1 to 9 March 2020) and after (3 to 15 June 2020) can be

considered as damage directly linked to the exceptional occurrence, as it will be

explained in sections 3.3.3.1 to 3.3.3.3.

3.3.3.1. Period from 1 to 9 March 2020

(76) As reported in recitals (8) to (11), Italy was one of the first Member States

severely affected by the COVID-19 outbreak and the adoption of governmental

restrictions, in particular since mid-February 2020.

(77) Since the end of February 2020, the Italian authorities adopted several measures

that considerably limited cultural, sport and school activities, and more generally

economic activities involving the gathering of people throughout the national

territory. This was the case in particular since 1 March 2020 with the adoption of

the Prime Minister’s decree referred to in recital (10) that substantially restricted

activities in Northern Italy and implemented health and sanitary measures on the

rest of the territory. Those restrictions were further reinforced for the whole

territory on 4 March 2020. In the meantime, other States either imposed travel

restrictions to Italy or published travel warnings for Italy between the end of

February and 9 March 2020.55

(78) Furthermore, the data provided by the Italian authorities clearly show that

Alitalia’s position strongly deteriorated in parallel to the governmental

restrictions put in place, with a sudden and substantial fall of ticket sales (see

Graphic 1) and passengers transported (fall of 60% in the space of three weeks)

between 21 February and 9 March (see recital (21)). Between 1 March and 9

March 2020, ticket sales registered an average decrease of 95%.

(79) Alitalia was further hampered from mitigating the steep decline in passenger

numbers in March 2020 due to the rule in Article 10 of Regulation (EC) No

95/93.56

According to that rule, where an airline possesses a slot at an airport, it

must use that slot for at least 80% of the scheduled flights for that slot’s use or

55

For example, on 24 February 2020 France and Belgium published their travel warnings to Italy (in

particular Northern Italy). The United States of America published travel warnings to Italy as of 28

February 2020. As regards the travel restrictions, Romania imposed for example travel restrictions to

Italy as of 2 March 2020; Austria did so on 6 March 2020.

56 Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at

Community airports OJ L 14, 22.1.1993, p. 1.

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risk losing that slot. Accordingly, between 1 and 9 March 2020, Alitalia was

unable to reduce flight operations to match the nearly 60% decline in passenger

numbers between 21 February and 9 March 2020. On 30 March 2020, the Union

amended Regulation No 95/93 to suspend the application of that rule.57

(80) Those indicators demonstrate that Alitalia’s activities were directly affected by

the COVID-19 outbreak and the restrictions already in place at the time

immediately preceding the full lockdown. Therefore, the Commission considers

that the period from 1 to 9 March 2020 can be included as part of the reference

period for the compensation.

3.3.3.2. Period from 10 March to 2 June 2020

(81) The Commission notes that in the period from 10 March to 2 June 2020 lockdown

measures were extensively and widely in force (see section 2.1.1) in Italy and

within the Union, translating into an extensive grounding of Alitalia’s fleet. Data

provided in recitals (24) to (27) confirm the impact of the restrictions on Alitalia’s

operations.

3.3.3.3. Period from 3 to 15 June 2020

(82) The Commission considers that, despite the lifting by Italy of the general

lockdown measures on 3 June 2020, Alitalia’s operations remained substantially

affected by the partial restrictions still in force at national and international levels

until 15 June 2020.

(83) First, domestic flights continued to be strongly limited by the ongoing closure by

Italy of a large number of Italian airports, including Milan Linate where Alitalia

has a secondary hub. In addition, Italy applied specific restrictions on some

internal routes, such as Sardinia. Italy thus continued to restrict partially air

services after 3 June 2020.

(84) Furthermore, as explained in recital (17), most Member States, following the

official advice of the Commission to maintain control measures in place until 15

June 2020,58

still kept their borders closed until mid-June, forcing Alitalia to keep

a large part of its fleet still grounded. Meanwhile Italian governmental restrictions

limited greatly travel to third countries (see recital (15)). Therefore, and as

confirmed by the company’s flights activities between 3 and 15 June 2020 (see

recital (31)), Alitalia could not operate normally in relation to international and

most European destinations, at least until 15 June 2020.

3.3.3.4. Conclusion on the direct link between the damage and the

exceptional event

(85) The Commission concludes that the notified measure aims to cover the net losses

of Alitalia caused by the suspension of flights as a direct effect of the COVID-19

57

Regulation (EU) 2020/459 of the European Parliament and of the Council of 30 March 2020 amending

Council Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community

airports, OJ L 99, 31.3.2020, p. 1.

58 See recital (14).

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outbreak and restrictions. Hence, there exists a direct causal link between the

damage suffered by Alitalia during the period from 1 March to 15 June 2020 and

the exceptional occurrence, i.e. the COVID-19 outbreak.

(86) That conclusion is without prejudice to an evaluation of further losses directly

caused by the COVID-19 outbreak that Alitalia may have suffered or still suffer

directly due to governmental containment measures and which Italy can prove are

directly linked to COVID-19 related containment measures. Should this be the

case, Italy can grant to Alitalia further aid aimed at covering that additional

damage, subject to the Commission’s prior assessment and authorisation.

3.3.4. Proportionality of the aid measure

(87) In order to be compatible with Article 107(2)(b) TFEU, the aid must be

proportional to the damage directly caused by the exceptional occurrence. Aid

must not result in over-compensation of damage; it should only make good the

damage caused by the exceptional occurrence.

(88) To ensure proportionality, it is necessary to analyse the assumptions and evidence

on which the calculation of damage for the factual scenario is based. In particular,

it is necessary to look at how the exceptional occurrence has actually and directly

affected the operations of Alitalia (e.g. Alitalia has been prevented from

operating) and what actual impact it has had on the costs and revenues of the

company.

(89) The damage to be compensated corresponds to the net loss, defined as loss of

revenue minus avoided costs. The loss of revenue is the difference between the

revenue that Alitalia would have expected during the period from 1 March to 15

June 2020, had the containment measures linked to the COVID-19 outbreak not

occurred, and the revenue that Alitalia has actually generated during the period

from 1 March to 15 June 2020. To approximate counterfactual revenues, actual

revenues for the same period of the previous year are used. Avoided costs

correspond to costs that Alitalia would have had during the period from 1 March

to 15 June 2020 if its activity had not been affected by the containment measures

linked to the COVID-19 outbreak, and that Alitalia did not have to bear as a result

of the cancelled operations (fuel, airport taxes, etc.). The avoided costs are

quantified by comparing the costs borne by Alitalia for the same period of the

previous year with the costs borne by the company during the period from 1

March to 15 June 2020.

(90) That quantification can be done by comparing the financial results from 1 March

to 15 June in 2020 and in the corresponding period of 2019. As stated in section

2.6.1, Italy assessed the overall net losses on the basis of a list of all flight-related

revenues minus all costs registered between 1 March and 15 June 2020,

evaluating the total net losses to EUR 211,85 million during that period compared

to the corresponding period in 2019 (taking into account avoided costs).

(91) The Italian authorities also submitted an evaluation of the damages on the basis of

a monthly EBITDA comparison for the period March-June 2020 and the same

period in 2019, which established the total net losses of Alitalia between 1 March

and 15 June 2020 at EUR 199.45 million (see section 2.6.2).

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(92) The evalutation based on EBITDA data provided by the Italian authorities, which

provides a more conservative estimate of Alitalia’s net losses than the

methodology based on a list of flight-related revenues and costs. The Commission

therefore considers that the EBIDTDA data should be taken into account for the

purpose of the calculation of Alitalia’s net losses. Hence, the Commission notes

that based on that more conservative methodology, the compensation proposed by

the Italian authorities does not exceed the amount of damages suffered by

Alitalia.

(93) In light of the above, the Commission considers that the measure granted by Italy

to Alitalia under Article 107(2)(b) TFEU (i.e. a compensation of EUR 199.45

million) does not exceed the damage estimated to have been incurred by Alitalia

directly linked to the exceptional occurrence and the governmental restrictions.

The Commission therefore concludes that the notified measure of EUR 199.45

million provides for compensation that does not exceed what is necessary to make

good the damage.

(94) In view of the above, the Commission concludes that the measure is

proportionate.

3.3.5. Cumulation

(95) The Italian authorities have confirmed that the aid cannot be cumulated with other

aid (also de minimis) covering the same eligible costs.

4. CONCLUSION

The Commission regrets that Italy failed to meet its obligations under Article 108(3)

TFEU. Nevertheless, in light of the above, the Commission has decided not to raise

objections to the aid on the grounds that it is compatible with the internal market

pursuant to Article 107(2)(b) of the Treaty on the Functioning of the European Union.

If this letter contains confidential information which should not be disclosed to third

parties, please inform the Commission within fifteen working days of the date of receipt.

If the Commission does not receive a reasoned request by that deadline, you will be

deemed to agree to the disclosure to third parties and to the publication of the full text of

the letter in the authentic language on the Internet site:

http://ec.europa.eu/competition/elojade/isef/index.cfm.

Your request should be sent electronically to the following address:

European Commission,

Directorate-General for Competition

State Aid Greffe

B-1049 Brussels

[email protected]

Yours faithfully,

For the Commission

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Margrethe VESTAGER

Executive Vice-President