EU Commission approves French restructuring aid and compensation for Air Austral

An Air Austral Boeing 777 approaches to land at dusk.
Sagaz974, CC BY-SA 4.0, via Wikimedia Commons
Len Varley - Assistant Editor 4 Min Read
4 Min Read

LONDON – The European Commission has authorised France’s plan to pay restructuring aid of EUR 119.3 million to enable the airline Air Austral to return to viability.

In addition, a further EUR 17.5 million in aid has also been approved to compensate the company for damage suffered as a result of the coronavirus pandemic between 17 March and 30 June 2020.

About Air Austral

Set up in October 1990 and based on Réunion, Air Austral is a French airline company that ensures territorial continuity between Réunion, and other neighbouring islands in the Indian Ocean (Mayotte in particular) and mainland France.

With a fleet of eight aircraft, it also operates services to destinations in the countries of the Southwest of the Indian Ocean and in Asia.

The restructuring aid approval

In January 2022, rescue aid for the French airline was approved and provided in the form of an EUR 20 million loan from the French State to Air Austral.

At the time, France has also formally notified the Commission of restructuring aid amounting to EUR 119.3 million aimed at funding a restructuring plan for the airline. Today the Commission approved the proposed restructuring aid for Air Austral.

According to the Commission, the plan makes it possible to ensure the long-term viability of the airline and thereby prevent it from being wound up, which would cause considerable harm to Réunion as an outermost and assisted region.

In making their decision to approve the restructuring aid, the EU Commission took into account the measures aimed at limiting distortions in competition, namely:

  •  the limitation on the number of seats offered by Air Austral;
  •  a limitation on the number of routes operated by the airline;
  • the ban on acquiring stakes in other undertakings; and
  • the establishment of business agreements with other airline companies that ask to do so.

These measures will continue to apply throughout the duration of the restructuring plan, which will run from January 2022 to March 2025. 

The compensation approval

In addition to the approval of funding to allow the airline’s restructuring, the EU Commission also approved a compensation payout to the airline for damages suffered during the global pandemic period of travel restrictions.

France had notified the Commission of an aid measure amounting to EUR 17.5 million to compensate Air Austral for damage it suffered between 17 March and 30 June 2020 as a direct result of the travel restrictions in place to limit the spread of the coronavirus.

Because of these travel restrictions, the airline incurred significant operating losses and experienced a steep decline in traffic and profitability over this period.

The Commission has powers to approve State aid measures granted by Member States to compensate specific companies or sectors for the damage directly caused by exceptional occurrences, such as the coronavirus outbreak.

In the case of Air Austral, the Commission found in particular that the French measure will make good the damage that is directly linked to the coronavirus outbreak.

It also found the measure to be proportionate, as the compensation does not exceed what is necessary to make good the damage.

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

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