Written by Dave Keating
As Europe’s airlines await the verdict on €30 billion ($32.5 billion) in requested bailouts, they got some good news from the European Commission yesterday.
The EU executive, which has the final say in approving or rejecting state aid and mergers, announced it is extending the temporarily relaxed state aid rules for the CoronaVirus crisis to recapitalization. The amendment will give unprecedented leeway to national governments to bail out companies facing liquidity crises. The first beneficiaries are likely to be Europe’s airlines.
But despite calls by environmental NGOs for these bailouts to be conditional on airlines committing to carbon emissions reductions and giving up the fuel tax benefits they have enjoyed for many years, the Commission’s regime will not require any such conditionality for state aid.
The problem, according to Commission sources, is that the EU executive doesn’t have the power to impose such specific conditions that do not relate to competition. This can only be done by the national EU governments awarding the aid. The new rules will, however, impose a ban on dividends and bonus payments to managers of companies receiving the aid.
The amendment will require companies receiving the aid to report on how they’re using the taxpayer money, and the Commission says it expects companies to outline how their measures are compatible with the EU’s Green Deal goal of reaching net zero emissions by 2050.
“For public transparency, large companies also have to report on the use of aid received and compliance with their responsibilities linked to the green and digital transitions,” said Margrethe Vestager, the Commission’s vice president in charge of competition.
A statement from the Commission stressed that national requirements for greening beyond what is required by the EU would be compatible with EU law.
“Member states are free to design national measures in line with additional policy objectives, such as further enabling the green and digital transformation of their economies,” it says.
The European Union normally has some of the most stringent competition rules in the world, far more stringent than in the United States. But these strict rules were suspended in March so countries can keep companies afloat during the COVID19 crisis, which has resulted in Europe’s largest economic contraction since the second world war.
The Commission has so far approved more than €1.9 trillion in national aid by EU member states. Airlines, which are facing an unprecedented liquidity crisis as a result of the collapse in passenger demand, have so far requested €30 billion in bailouts according to an airline bailout tracker being managed by green NGOs.
Governments have approved at least €11.5 billion of that, but only France has attached a green condition for airlines. The French government is asking Air France to cancel domestic flights that compete with high-speed rail as a condition for the bailout it received last week.
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