State aid: Commission approves €1.7 billion German measure to recapitalise Flughafen Berlin Brandenburg in the context of the coronavirus pandemic

State aid: Commission approves €1.7 billion German measure to recapitalise Flughafen Berlin Brandenburg in the context of the coronavirus pandemic

The European Commission has approved German plans to grant up to €1.7 billion for the recapitalisation of Flughafen Berlin Brandenburg Gmbh (‘FBB’). The measure was approved under the State aid Temporary Framework.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Airports have been hit particularly hard by the coronavirus outbreak and the travel restrictions in place. With this measure, Germany will contribute to reinforcing Flughafen Berlin Brandenburg’s equity position and help the company face the economic effects of the outbreak. At the same time, the public support will come with strings attached to limit undue distortions of competition. We continue working in close cooperation with Member States to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

The German recapitalisation measure

FBB is the state-owned airport operator in Berlin, Germany. It manages the Berlin Brandenburg airport (‘BER’).

Due to the coronavirus outbreak and the travel restrictions that Germany and other countries had to impose to limit the spread of the virus, FBB suffered substantial losses while still facing significant operational costs. As a result, the equity and liquidity position of the company deteriorated.

In this context, Germany notified to the Commission, under the Temporary Framework, its plans to grant up to €1.7 billion for the recapitalisation of FBB by allowing its public shareholders, the Länder Berlin and Brandenburg and the Federal Republic of Germany, to inject the capital into FBB’s capital reserve.

FBB will use part of the aid to repay the subsidized interest loans granted under a previous scheme that the Commission approved in August 2020(SA.57644).

The Commission found that the recapitalisation measure notified by Germany is in line with the conditions set out in the Temporary Framework. In particular:

  •  Conditions on the necessity, appropriateness and size of the intervention: the capital injection will not exceed the minimum needed to ensure the viability of FBB and will not go beyond restoring its capital position compared to before the coronavirus outbreak;
  • Conditions on the State’s entry: the recapitalisation aid will prevent an insolvency of FBB, which would have serious consequences for Berlin’s connectivity and employment;
  • Conditions regarding the exit: Germany committed to work out a credible exit strategy within 12 months after the aid is granted, unless the State’s intervention is reduced below the level of 25% of equity by then. Should the State’s intervention not be reduced below 15% of FBB’s equity after seven years from the recapitalisation, Germany will have to notify a restructuring plan for FBB to the Commission.
  •  Conditions regarding governance and acquisition ban: until at least 75% of the recapitalisation is redeemed, FBB (i) will be subject to strict limitations as regards the remuneration of its management, including a ban on bonus payments; and (ii) will be prevented from acquiring a stake of more than 10% in competitors or other operators in the same line of business;
  • Commitments to preserve effective competition: until the aid has been fully redeemed, FBB will not offer any discounts to airlines and not expand its capacity. This is to ensure that FBB does not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the Single Market; and
  •  Public transparency and reporting: FBB will have to publish information on the use of the aid received and on how it supports activities in line with EU and national obligations linked to the green and digital transition.

The Commission concluded that the recapitalisation measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. The measure aims at restoring the financial position and liquidity of FBB in the exceptional situation caused by the coronavirus pandemic, while maintaining the necessary safeguards to limit competition distortions.

On this basis, the Commission approved the measures under EU State aid rules.

Background

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under State aid control and do not require the Commission’s approval under EU State aid rules. In all these cases, Member States can act immediately. When State aid rules are applicable, Member States can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework.

On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities.

In this respect, for example:

  • Member States can compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
  • State aid rules based on Article 107(3)(c) TFEU enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
  • This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all Member States due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State aid Temporary Framework based on Article 107(3)(b) TFEU to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021, provides for the following types of aid, which can be granted by Member States: (i) Direct grants, equity injections, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies; (iii) Subsidised public loans to companies, including subordinated loans; (iv) Safeguards for banks that channel State aid to the real economy; (v) Public short-term export credit insurance;(vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees; (xi) Targeted support in the form of equity and/or hybrid capital instruments; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak;(xiii) Investment support towards a sustainable recovery; and (xiv) Solvency support.

The Temporary Framework will be in place until 30 June 2022, with the exception of investment support towards a sustainable recovery, which will be in place until 31 December 2022, and of solvency support, which will be in place until 31 December 2023. The Commission will continue to monitor closely the developments of the COVID-19 pandemic and other risks to the economic recovery.

Source: State aid: Commission approves €1.7 billion German measure (europa.eu)

Photo Credit : https://pixabay.com/nl/photos/banier-vlag-duitsland-zwart-rood-3635260/

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