The European Commission has approved €12 million in Portuguese support in favour of SATA Air Açores - Sociedade Açoriana de Transportes Aéreos S.A. (‘SATA Air Açores') as compensation due to damages suffered as a direct result of travel restrictions imposed due to the coronavirus outbreak. Furthermore, it approved up to €255.5 million additional liquidity support to SATA Air Açores. At the same time, the Commission has extended the ongoing in-depth investigation into other support measures to assess whether Portugal's planned restructuring support measures in favour of SATA are in line with EU rules on State aid to companies in difficulty.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The measures we have approved today, amounting to almost €270 million, will enable Portugal to provide immediate support to SATA Air Açores and Azores Airlines to ensure the continuity of air connections within and to the Azores, an outermost region of the EU. At the same time, we have extended the ongoing investigation into the compliance of past measures in favour of the airlines. We will continue to be in close contact with the Portuguese authorities in this context.

SATA Air Açores and Azores Airlines, along with SATA – Gestão de Aeródromos, belong to the SATA Group, which is controlled by the Regional Government of Azores. The two air carriers provide air transport passenger and cargo services within the Azores and to and from several national and international destinations. SATA Air Açores is focused on inter-island flights, while Azores Airlines mostly operates flights to and from mainland Portugal and international destinations. The airlines have been entrusted with public service obligations (‘PSO') on domestic routes and certain routes to mainland to ensure connectivity of the islands in the Açores. SATA – Gestão de Aeródromos manages the small local airports in Azores.

Compensation for damage suffered by SATA due to coronavirus outbreak

Portugal notified to the Commission an aid measure to compensate the two airlines for damages suffered between 19 March 2020 and 30 June 2020 due to the travel restrictions that the Regional Government of Azores, Portugal and the authorities of other destination countries had to impose to limit the spread of the coronavirus.

The support will take the form of a €12 million direct grant. The measure provides that, following appropriate reporting by SATA to the Commission at the end of the financial year, any public support received by the beneficiaries in excess of the actual damage suffered will have to be returned to Portugal. The risk of overcompensation is therefore excluded.

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 granted to compensate specific companies or specific sectors for the damages directly caused by exceptional occurrences. The Commission considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the Member States to compensate for the damages directly linked to the outbreak are justified.

The Commission found in particular that the Portuguese measure will compensate damage that is directly linked to the coronavirus outbreak. The Commission also found that the measure is proportionate, as the compensation does not exceed what is necessary to make good the damage.

On this basis, the Commission concluded that the Portuguese measure is in line with EU State aid rules.

The Portuguese liquidity support measure

Separately, Portugal notified the Commission of its intention to grant an additional €122.5 million in support to SATA, with the aim of providing the airlines with sufficient resources to address its urgent and immediate liquidity needs until the end of 21 November 2021, or until the Commission takes a final decision on the ongoing investigations. This follows the Commission's decision of 18 August 2020 approving, under EU State aid rules, €133 million in liquidity support to the SATA airlines.

The support, in the form of a public guarantee on temporary loans or public loans, allows the company to continue providing essential services including routes subject to PSOs and services of general economic interest at local airports, ensuring the connectivity of the Azores outermost region.

The Commission found that the increase and prolongation of individual aid to SATA in the form of guarantees and loans strictly relates to urgent liquidity needs linked to the provision of essential services including routes subject to PSOs and services of general economic interest at local airports. On this basis, the Commission approved the measure under EU State aid rules.

Extension of ongoing investigation into other support measures

Furthermore, Portugal notified the Commission of its intention to grant restructuring aid to support SATA's restructuring plan. This follows the adoption, also on 18 August 2020, of a Commission decision to open an in-depth investigation to assess whether certain past public support measures by Portugal in favor of SATA are in line with EU rules on State aid to companies in difficulty (under case number SA.58101).

At this stage, the Commission has doubts that the planned restructuring aid is in line with these rules. In particular, the Commission has doubts on:

  1. the proportionality of the restructuring aid, given that the contribution of SATA to the costs of its restructuring is less than 50% and therefore that the restructuring aid does not appear to be limited to a minimum;
  2. the solidity of the assumptions under and the timespan of the restructuring plan; and
  3. compliance with the so-called “one time, last time” principle that companies in financial difficulty can receive restructuring aid only once over a period of 10 years.

In addition, the doubts on the compatibility of the certain past public support to SATA raised in the formal proceedings opened on 18 August 2020 remain valid at this moment.

The opening of an in-depth investigation is a normal step in the procedure, which provides Portugal and other interested parties with an opportunity to provide comments. It does not prejudge in any way the outcome of the investigation.