The European Commission has found a Swedish State guarantee of up to approximately €137 million on a revolving credit facility in favour of Scandinavian airline SAS to be in line with EU State aid rules. The measure aims at partly compensating the airline for the damage suffered due to the coronavirus outbreak.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: ”The aviation sector has been hit particularly hard by the coronavirus outbreak. The measure approved will enable Sweden to compensate SAS for part of the damage suffered due to the coronavirus outbreak through a public guarantee of up to €137 million. Putting in place the necessary support measures in a timely, coordinated and effective way, in line with EU rules, is of paramount importance in these challenging times.”
SAS is a major network airline operating in Sweden, Denmark and Norway. SAS contributes to nearly 50% of the domestic connectivity of Sweden and accounts for almost 25% of Sweden's international traffic, with 6.7 million passengers carried annually to and within Sweden. Since the start of the coronavirus outbreak, SAS has suffered a significant reduction of its services, resulting in high operating losses.
On 11 April 2020 the Commission approved a State guarantee scheme for airlines notified by Sweden. However, the significant drop in travel demand in relation to the coronavirus outbreak and to the emergency measures necessary to limit its spread continues deteriorating the airlines' financial situation. Sweden decided to complement the existing scheme by providing for compensation of the damage directly linked to the coronavirus outbreak to those airlines which are eligible for a State guarantee under the existing scheme, but which face difficulties in obtaining loans from credit institutions under the conditions prescribed in the approval decision of 11 April 2020.
Accordingly, Sweden notified to the Commission an aid measure to partly compensate SAS for the damage suffered due to the cancellation or re-scheduling of its flights as a result of the imposition of travel restrictions linked to the coronavirus.
The support will take the form of a State guarantee on a revolving credit facility in favour of SAS. Sweden will guarantee up to approximately€137 million of such revolving credit facility.
If SAS will ultimately not be eligible to receive a State guarantee for the loan under the already approved guarantee scheme for airlines, it will receive it under the present individual aid measure.
The exact damage suffered by SAS as a result of the outbreak will be quantified after the coronavirus crisis, based on the airline's operating accounts for the year 2020. The method used to quantify the damage will be subject to the Commission's prior approval. Furthermore, should the Swedish public support exceed the damage actually suffered by SAS due to the coronavirus outbreak a claw-back mechanism will be activated. In other words, all the public support received by SAS in excess of the actual damage suffered will have to be returned to Sweden. The risk of the State aid exceeding the damage 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 measures granted by Member States to compensate specific companies or specific sectors (in the form of schemes) for damage 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 damage linked to the coronavirus outbreak are justified.
The Commission found that the Swedish measure will compensate the damage suffered by SAS that is directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the foreseen compensation does not exceed what is necessary to make good the damage.
The Commission therefore concluded that the scheme is in line with EU State aid rules.