LONDON – The European Commission has today approved a €453m state aid restructuring package for Portuguese carrier SATA Air Azores.

The €453m state aid breaks down into the following:

• €144.5m direct loan.
• €173.8m in debt assumptions.
  • This and the direct loan converts into around €318.25m of equity.
• €135m in state guarantees until 2028 for funding to be provided by banks and other financial institutions.

Vestager: Distortion of Competition Will Be Limited…

Commenting on the approval was Margrethe Vestager, the Executive Vice-President of Competition Policy for the European Commission:

“The measure we approved today will ensure the territorial continuity of the Azores islands with mainland Portugal and the European Union while allowing the return to the viability of its regional air carrier SATA.”

“At the same time, the aid will enable SATA to reorganize its activity, by improving operations and schedules, and by reducing operating costs.”

“The public support comes with safeguards to make sure that possible distortions of competition are limited.”

The EU Commission’s Assessment…

As per the release, the European Commission mentioned the following three things when it came to approving the state aid:

• The aid is necessary and appropriate to ensure that SATA, being a company in difficulty, will be viable long-term without the need of continued public support.
• The negative effects of the restructuring aid on the air transport sector are limited. In particular, the Commission found that the envisaged divestments would allow competitors to take over or integrate part of the routes currently offered by SATA, beyond its remit of the provider of a Service of General Economic Interest.
• The restructuring aid complies with Article 107(3)(c) TFEU as it facilitates the development of the regional air transport and related activities, in particular in the tourism sector, in the Azores and does not distort competition to an extent contrary to the common interest.

SATA will also be banned from any acquisitions going into the future and will have a cap on the number of aircraft in its fleet until the plan concludes.

Could This Anger Ryanair?

At the time of writing, there has been no response from Ryanair over the approval of this state aid, especially when there were around €462m approved for TAP Air Portugal late last year.

Ryanair did protest against this and even went as far as canceling 19 routes from Lisbon due to unused slots by the Portuguese flag carrier.

We will probably see something from Ryanair, but on the other hand, SATA doesn’t cover as much ground as the likes of TAP Portugal would do.

Even so, it is more European state aid that is being approved, and this will probably fall under the radar of Ryanair eventually. It’s only a matter of time.

What remains clear, is that for now, the European Commission is working proactively to ensure airlines can stay in business, especially when we are close to a very successful and busy Summer 2022 season.