The European Commission has launched an in-depth investigation to assess whether Italy’s bridge loan to Alitalia totalling €900m constitutes State aid and if it complies with European Union rules.

“The Commission has a duty to make sure that loans given to companies by member states are in line with the EU rules on State aid,” said Commissioner Margrethe Vestager, in charge of competition policy, on April 23. “We will investigate whether this is the case for Alitalia.”

Alitalia is an Italian airline owned by the consortium Compagnia Aerea Italiana – CAI (51% shares) and Etihad Airways (49%). Alitalia has been in financial difficulty for a number of years.

In April 2017, Alitalia’s staff rejected a cost-cutting plan, which meant that the shareholders decided not to provide additional financing to Alitalia. As a result, Alitalia was placed under extraordinary administration under Italian bankruptcy law.

According to a Commission press release, the Italian state granted a €600m bridge loan to Alitalia in May 2017 to ensure financing during the period of extraordinary administration. In October 2017, this loan was increased by an additional €300m. The extraordinary administrators also started a tender procedure aimed at finding a buyer for Alitalia’s assets.

In January, Italy notified the total €900m State loan granted to Alitalia as rescue aid within the meaning of EU State aid rules, namely the Commission’s Rescue and Restructuring Aid Guidelines. This followed a number of complaints received by the Commission in 2017, alleging that the loan constitutes State aid that it is not compatible with the applicable EU rules.

The Commission’s current view is that the State loan may constitute State aid. It will now investigate further whether the loan satisfies the conditions under the guidelines.

As reported by the Reuters news agency, the European Commission can order Italy to recover the money if it finds that the aid is illegal.