On March 8, 2021 the European Commission (“EC”) approved Latvia’s notification of its sizeable financing plans to recapitalize Riga International Airport (“RIX”), in the exceptional situation caused by the coronavirus pandemic.
The EC held the recapitalization measures notified by Latvia are in line with Article 107(3)(b) TFEU and the conditions set out under the State aid Temporary Framework (“Temporary Framework”). The EC further held, the measures are “necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member States”, while maintaining the necessary safeguards to limit competition distortions.
RIX is fully owned by the Latvian State, with its business activities ranging from the provision of aviation services (handling of aircraft, passengers and cargoes), to the provision of nonaviation services (e.g., the lease of premises and land, as well as car parks). RIX is also an important hub for the connectivity of Latvia (and the Baltics) with the rest of Europe and third countries.
The approved aid measure under the Temporary Framework, results in RIX receiving up to EUR 39.7 million, specifically in the form of:
The conditions under which the recapitalization is granted are as follows:
Following approval of the Latvian aid measure, EC Executive Vice-President Margrethe Vestager, in charge of competition policy, highlighted: “Airports are among the companies that have been hit particularly hard by the coronavirus outbreak. With this measure, Latvia will contribute up to €39.7 million to reinforce Riga International Airport's equity and support the company face the economic effects of the outbreak. At the same time, the State aid will come with strings attached to limit undue distortions of competition. We continue working closely with Member States to ensure that national support measures can be put in place in a coordinated and effective way, in line with EU rules”.
The non-confidential version of the decision will shortly be made available under the case number SA.57756.
Similar to airBaltic, RIX is witnessing heavy financial bleeding due to ongoing coronavirus outbreak, travel restrictions and a significant drop in travel demand. With no apparent certainty as to when normality will indeed present itself, these aid measures are necessary to avoid a financial collapse of RIX. In light of the current outlook, the aid measure may need restructuring after 12 months if the ongoing global travel restrictions do indeed continue with no foreseeable end. The strict restrictions imposed on the aid measure are expected, given the EC’s careful approach to maintain a competitive marketplace during and after the coronavirus pandemic. With the sizeable amount of aid being pumped in by EU Member States, it will be very interesting to whether the EC has indeed managed to strike a competitive balance in the marketplace. We will likely see many more notified aid measures by EU Member States to assist airports (important connectivity hubs) in maintaining economic viability until the return of normality. While the EU travel industry desperately awaits a decision on “vaccine passports”, the travel restrictions limit any form of viable financial recovery for the foreseeable future.
While undoubtably welcomed, the significant increase in the size of the aid scheme signifies the ever piling impact of the coronavirus pandemic in Latvia. The ever increasing aid scheme notifications under the Temporary Framework rules is slowly evidencing the extent of the economic cost of the pandemic across the Member States. It is without a word of doubt, we will continue to see the modification and extension, as well as the introduction of additional aid schemes in the months to come.
On 28 January 2021, the European Commission announced its decision to extend the validity of Temporary Framework rules, as well as the previous scope to assist the European bloc in its fight against the ongoing economic strains caused by the coronavirus outbreak. The Temporary Framework rules will now apply until 31 December 2021.
If you have any questions concerning the recently approved scheme(s) or any other State aid related questions, please contact a member of our competition team.