Alitalia must repay 400 mln euros in illegal state aid, EU says

New airline carrier starts flying in place of a bankrupt Alitalia
A person shows a hand painted with Alitalia logo during a protest against Italia Trasporto Aereo (ITA) at Fiumicino airport, as the new airline carrier starts flying in place of bankrupt Alitalia, in Rome, Italy, October 15, 2021. REUTERS/Guglielmo Mangiapane

BRUSSELS, March 27 (Reuters) - Alitalia, the predecessor of Italian state-owned airline ITA Airways, will have to repay a 400 million-euro ($430 million) loan to the Italian government because the money breached EU state aid rules, EU competition authorities said on Monday.

Italy granted the loan in 2019, two years after giving a 900 million-euro loan to keep the loss-making company operating. The carrier never repaid the money.

The European Commission, which acts as the competition watchdog in the 27-country bloc, subsequently ruled that both loans constituted illegal state aid.

"No private investor would have granted the loan to the company at the time and the loan gave Alitalia an unfair economic advantage vis-à-vis its competitors on national, European and world routes," the EU executive said in a statement.

Commission spokesperson Arianna Podesta said the loan can be registered as a liability under Alitalia's ongoing insolvency proceedings.

"The 400 million will be repaid by Alitalia within the limits of the revenues obtained from the sale of the assets of the company and the value of any remaining assets," she told a daily news conference.

The Commission had in 2021 it ordered Alitalia to repay the 900-million-euro illegal loan.

Italian Economy Minister Giancarlo Giorgetti said the EU executive's decision was "expected and widely foreseen", and expressed relief that the loan repayment request does not concern Alitalia's successor ITA Airways.

Successive governments pumped an estimated 10 billion euros into Alitalia to keep it afloat in its last 14 years of life, despite heavy losses and bad management.

ITA was established in 2020, and has still to turn a profit. Germany's Lufthansa (LHAG.DE) is negotiating with the Italian government over the purchase of a 40% stake in the airline, with the idea to buy the rest at a later stage.

($1 = 0.9289 euros)

Reporting by Bart Meijer and Foo Yun Chee; Additional reporting by Alvise Armellini in Rome; Editing by Benoit Van Overstraeten, Louise Heavens and Jan Harvey

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